Corporate Transparency Act Enforcement Resumes
The nationwide injunction suspending enforcement of the Corporate Transparency Act (CTA) has been stayed, meaning reporting companies, including many ILMA members, are now required to file beneficial ownership information reports with the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN).
On February 18, FinCEN issued a notice resetting the filing deadline for most companies to March 21, 2025, acknowledging the recent decision by the U.S. District Court for the Eastern District of Texas.
While efforts are underway in Congress to extend the filing deadline until at least January 1, 2026, the law has regained full force despite controversies over its constitutionality. Although the Trump administration continues to defend the CTA in court, it is possible that FinCEN may implement burden reduction measures to ease compliance for small businesses that pose low risk in terms of national security and illicit financial misconduct.
Reporting Requirements
- Information about reporting company:
- Entity’s full legal name
- Trade names
- A complete current address
- The jurisdiction it was formed in or jurisdiction in which a foreign company first registers
- Internal Revenue Service Taxpayer Identification Number and Employer Identification Number
- Information about beneficial owners and company applicants
- Full legal name
- Date of birth
- Current business or residential address
- A unique identifying number from an acceptable identification document (i.e., passport, driver’s license, etc.) or FinCEN identifier
Background on the CTA
Enacted under the National Defense Authorization Act in 2021, the CTA requires millions of small business owners to report beneficial ownership information, including personal information, to FinCEN, which seeks to combat money laundering and other crimes. Stakeholders filed suits challenging the constitutionality of the law. There has been a flurry of litigation activity impacting the effectiveness of the reporting scheme. These are the most recent developments:
- January 7, 2025 –– A federal judge in Texas in Smith v. U.S. Department of the Treasury issued an injunction preventing FinCEN from implementing the CTA’s reporting requirements.
- January 23, 2025 –– The U.S. Supreme Court granted the government’s request to stay the nationwide injunction issued by another federal judge in Texas Top Cop Shop, Inc. v. McHenry. However, the Smith injunction remained in place.
- February 5, 2025 –– The government filed a notice of appeal and requested a stay of the Smith injunction.
- February 18, 2025 –– The federal judge in the Smith case lifted the preliminary injunction, clearing the path for CTA enforcement.
Developments in the Texas Top Cop Shop litigation are forthcoming, as a three-judge panel at the Fifth Circuit Court of Appeals prepares to hear oral arguments on the constitutionality of the CTA on March 25.
“Given the litigation complexities surrounding this regulation and the constitutional issues in controversy, it is possible that the Supreme Court will ultimately weigh in on the merits,” said ILMA General Counsel Jeff Leiter.