On January 23, 2024 we posted the following article about the Corporate Transparency Act and its Potential Impact. This announced the introduction of new federal reporting requirements for many U.S. businesses, including corporations, LLCs, and partnerships. Aimed at increasing transparency in ownership and control, the CTA mandates certain entities file a Beneficial Ownership Information (BOI) Report with FinCEN, detailing key company and ownership details.
However, as the year has gone on there have been some major updates to the Corporate Transparency Act. You may have already received one of our client alert emails detailing the changes, but we wanted to mitigate confusion by compiling all of the updates into one article here.
[LATEST]
Update from January 27, 2025 @ 11:00am
On January 23, 2025, the U.S. Supreme Court granted the Department of Justice’s request to stop a nationwide injunction issued by a Texas federal judge (Texas Top Cop Shop, Inc. v. McHenry—formerly, Texas Top Cop Shop v. Garland). Had the Supreme Court not intervened, the nationwide injunction would have prevented the federal government from enforcing the CTA’s regulations requiring beneficial ownership reporting. This stay remains in place pending the outcome of the appeal in the U.S. Court of Appeals for the Fifth Circuit and any petition to the U.S. the Supreme Court. Oral argument is set at the Fifth Circuit for March 25, 2025.
However, as of January 24, 2025, the Department of the Treasury’s Financial Crimes (FinCEN) bureau – which oversees enforcement of the CTA – posted on its website (https://fincen.gov/boi) that “reporting companies are not currently required to file beneficial ownership information with FinCEN” because of another nationwide injunction against CTA enforcement issued by a different Texas federal judge (Smith v. U.S. Dept. of the Treasury). The website states that “[r]eporting companies also are not subject to liability if they fail to file this information while the Smith order remains in force.” The Smith order was issued on January 7, 2025, and the Department of the Treasury has not yet filed a notice of appeal.
As the new Trump administration fills its leadership roles at the Department of Treasury and Department of Justice, we do not yet know whether the Trump administration will continue to defend the CTA or side with the plaintiffs challenging its constitutionality.
What does this mean for you?
In summary, the effect of the information above does not change our last update…Small businesses are not presently required to comply with the reporting requirements of the CTA but may do so as the filing portal remains open.
Update from January 16, 2025 @ 12:00pm
As of January 16, 2025, enforcement of the Corporate Transparency Act (“CTA”) continues to be enjoined. The United States Supreme Court is presently reviewing filings by the plaintiffs, the federal government, and other interested parties to determine whether the temporary injunction stopping enforcement of the CTA should remain in place until a trial on the merits.
What does this mean?
Small businesses are not presently required to comply with the reporting requirements of the CTA. Businesses that are not exempt and that were formed prior to January 1, 2024 were supposed to have filed prior to January 1, 2025 but for the injunction. Under the rules of the CTA, businesses that are formed in 2024 have 90 days from the formation date to file, and businesses formed in 2025 and thereafter have 30 days from the formation date to file. Since these rules are currently enjoined, recently formed businesses do not have to file within these timeframes, but may do so as the filing portal remains open.
What’s next?
A determination by the United States Supreme Court as to whether the CTA may be subject to a temporary nationwide injunction until a trial on the merits can occur. If the temporary injunction remains in place, then the case will proceed to a trial on the merits, with the possibility of further appeals after the trial. If the temporary injunction is lifted, the federal government may begin enforcement of the CTA, presumably with new reporting deadlines which have not yet been established. However, even if the temporary injunction is lifted, a trial on the merits could result in a permanent injunction in the future. The incoming Trump administration and Congress could also take action that would impact how or if the CTA is enforced.
What should I be thinking about?
Preparation. But first, you should determine whether to comply with the CTA reporting requirements while the temporary injunction is in place, which you are permitted to do. The benefit of doing so is that if enforcement of the CTA were to resume, you would have already complied with initial reporting requirements. The downside, of course, is that if the CTA remains enjoined or is repealed altogether, you would have unnecessarily provided private information about yourself and your business to the federal government. Second, if you do not wish to file now, you should be prepared to act quickly if the filing requirements are reinstated. If CTA enforcement resumes, new deadlines are anticipated but not known at this time.
Update from December 27, 2024 @ 12:00pm
In our most recent Corporate Transparency Act (CTA) Update, we shared that on December 3, 2024, a Texas Federal District Court issued a nationwide preliminary injunction of the CTA and that “reporting companies need not comply with the CTA’s… reporting deadline pending further order of the Court.” The week of Christmas saw additional developments in the courts, but the current situation at the time of this writing is that the injunction of the CTA remains in effect. On December 23, 2024, the U.S. Court of Appeals for the Fifth Circuit approved an emergency motion filed by the U.S. Government, thus reinstating the Corporate Transparency Act. Later that day, the U.S. Department of Treasury’s Financial Crimes Enforcement Network (FinCEN) extended reporting deadlines for companies formed prior to 2024 from the original deadline of January 1, 2025 to a new deadline of January 13, 2025. The plaintiffs in the underlying case requested further review from the entirety of the Fifth Circuit justices, which is still pending. However, on December 26, 2024, the Fifth Circuit vacated its own stay of the lower court’s preliminary injunction, which in effect reinstates the injunction of the CTA.
This continues to be a developing issue with a lot of activity in the courts. Enforcement of the CTA could resume pending further developments in this matter. At this juncture, it remains our recommendation that all reporting companies consider whether or not to go ahead and file the BOI reports required under the CTA. Those reporting companies deciding to wait should continue to closely monitor the CTA filing requirements and take actions to be prepared to swiftly comply with any new CTA filing deadlines if the injunction is lifted. Reporting companies may elect to comply with the CTA filing requirements during the pendency of the court action as the filing portal does remain open.
West Webb attorneys are analyzing the implications of this ruling and monitoring further developments but wanted to make sure you are aware of the current situation in light of recent court actions. West Webb will provide updates and future correspondence on this issue as circumstances warrant.
Disclaimer: This information does not constitute tax or legal advice, does not create an attorney-client relationship, and is intended for informational purposes only.
Update from December 3, 2024 @ 2:20pm
In a prior alert sent on November 1, 2024, we reminded you of the pending end-of-the-year deadline for compliance with the Corporate Transparency Act (CTA) for entities in existence prior to 2024. Yesterday, December 3, 2024, a Texas Federal District Court issued a nationwide preliminary injunction of the CTA and stated that “reporting companies need not comply with the CTA’s… reporting deadline pending further order of the Court.” Please note that a preliminary injunction is only a temporary ruling which can be made permanent, modified or removed altogether at a later date, and is not a final decision. The Court’s order temporarily pauses enforcement of the CTA, but enforcement could resume pending further developments in this matter.
West Webb attorneys are analyzing the implications of this ruling and monitoring further developments, but wanted to make sure you are aware of this latest development.
Disclaimer: This information does not constitute tax or legal advice, does not create an attorney-client relationship, and is intended for informational purposes only.
Update from November 1, 2024 @ 1:50pm
The deadline for compliance with the Corporate Transparency Act (CTA) for entities in existence prior to 2024 is fast approaching – December 31, 2024! Now is the time to take action.
West Webb is ready to assist with your CTA compliance needs, but you must let us know that you need our help by the Wednesday before Thanksgiving, November 27, 2024. Please reach out to either Sandy Avila at sandy.avila@westwebb.law or the attorney with whom you regularly work with and we will be glad to assist.
* Please note that there are many fraudulent websites offering to register your entity. Don’t be a victim and provide potentially sensitive information that could be used for a cyber-crime.
If you are not familiar with the Corporate Transparency Act or whether this may apply to you, read about it at our blog post here.
We anticipate that many around the country will wait until the month of December to make the required online filings, which could lead to the possibility of long delays or crashes of the online filing system.
We encourage you to avoid the potential headache of last-second filings. If you need our help, contact West Webb soon so that we may assist you in a timely manner. As a reminder, there are potentially significant consequences for failing to comply with the Corporate Transparency Act.
Disclaimer: This information does not constitute tax or legal advice, does not create an attorney-client relationship, and is intended for informational purposes only.