Nationwide Injunctions STAYED – Corporate Transparency Act Reporting Requirements Revived

Alert
By Heyward Armstrong and Davis Fussell

Since our December 31, 2024, client alert, there has been a flurry of activity involving all three branches of the federal government regarding the Corporate Transparency Act (“CTA”). This activity culminated in the recent decision of the U.S. District Court for the Eastern District of Texas in Smith v. U.S. Department of the Treasury to stay the last-remaining nationwide preliminary injunction against the CTA. In making its decision, the Smith court cited the January 23, 2025, U.S. Supreme Court ruling in the Texas Top Cop Shop litigation, which stayed the nationwide preliminary injunction against the CTA that had been imposed by the district court in that case. Although the nationwide preliminary injunctions have been stayed, these cases remain pending on the merits, along with other cases challenging the CTA in various federal courts.

As a result of the Smith decision, compliance with the CTA is again mandatory, and reporting companies (as defined under the CTA) will again be subject to liability if they do not to comply with the CTA’s beneficial ownership information (“BOI”) filing requirements. To assist reporting companies in meeting their obligations under the CTA, on February 18, 2025, the Financial Crimes Enforcement Network (“FinCEN”) issued guidance outlining its plans with respect to the CTA and the deadlines for reporting companies to file their BOI reports. In summary, that guidance is as follows:

  • March 21, 2025, filing deadline: FinCEN set March 21, 2025, as the new filing deadline for initial, updated and/or corrected BOI reports for most companies.
  • Reporting companies subject to later deadlines: Reporting companies that qualify for later deadlines (e.g., companies eligible for a disaster relief extension, as discussed in our November 21, 2024, client alert) may continue to comply with the later deadlines.
  • FinCEN review of BOI requirements: FinCEN stated that it will consider options to further modify its deadlines and will provide an update before March 21, 2025, of any further changes to this deadline. FinCEN also stated that it also intends to initiate a process later this year to revise the reporting requirements to reduce the burden for lower-risk entities.

Congress has also weighed in recently, with the U.S. House of Representatives unanimously approving the Protect Small Businesses from Excessive Paperwork Act of 2025. This legislation would extend the reporting deadline for initial BOI reports for companies formed before January 1, 2024, until January 1, 2026. The timing and outcome of action by the Senate and passage of any legislation remain uncertain.

Without any realistic prospect of further nationwide injunctions against the CTA, relief from the CTA cannot be expected from the courts by March 21, 2025. Therefore, unless FinCEN or Congress acts by March 21, 2025, to further extend or otherwise impact the reporting deadlines under the CTA, reporting companies will be required to file BOI reports by that date.

Given the current legal landscape with respect to the CTA, we recommend that reporting companies take the following steps:

  • Be Prepared to Comply with the CTA: Most importantly, reporting companies should be prepared to file their BOI reports by the applicable deadlines. While there may be further relief from the courts, FinCEN and/or Congress, there is no guarantee that such relief will be available by March 21, 2025, or, even if available, will apply to all reporting companies. As a reminder, reporting companies formed in 2025 generally must file their initial BOI reports within 30 days following their date of formation (except for reporting companies formed on or before February 18, 2025, which have until March 21, 2025, to file their initial reports).
  • Monitor Further Developments: If the Protect Small Businesses from Excessive Paperwork Act is passed into law, reporting companies formed before January 1, 2024, will have until January 1, 2026, to file their initial BOI reports. We generally recommend that companies that may benefit from this filing relief keep a close watch on congressional action and consider delaying their filings until the congressional path forward becomes clearer (but certainly no later than March 21, 2025, if no further relief is provided before then), especially as FinCEN has indicated that it continues to consider providing additional filing relief. Companies employing this strategy should be mindful that there may be a crush of filings on March 21, 2025, so filing earlier is advisable to avoid missing a filing deadline due to technological or other filing issues.

Smith Anderson will continue to monitor developments in this area and will provide updates as they become available. As always, if you have any questions regarding the CTA, please do not hesitate to contact a member of the Corporate & Transactional group or your regular Smith Anderson lawyer.

Prior CTA Client Alerts:

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