On February 17, 2025, the US District Court for the Eastern District of Texas stayed its January 7 order, enjoining enforcement of the Corporate Transparency Act and suspending the effectiveness of the related implementing regulations. The following day, the US Financial Crimes Enforcement Network announced that it is extending the compliance deadlines for most reporting companies under the Reporting Rule until March 21. We examine the impact of these two actions in this Legal Update.
On February 17, 2025, the US District Court for the Eastern District of Texas stayed its January 7, 2025 order, enjoining enforcement of the Corporate Transparency Act (CTA) and suspending the effectiveness of the related implementing regulations (the "Reporting Rule") pending appeal, citing the recent action of the US Supreme Court staying a nationwide preliminary injunction in a similar case. The court's action has the effect of immediately reinstating the Reporting Rule and restoring the beneficial ownership information reporting requirements that had been suspended since December 2024.
The US Financial Crimes Enforcement Network (FinCEN) announced on February 18, 2025 that it is
extending the compliance deadlines for most reporting companies
under the Reporting Rule until March 21,
2025.1
In its announcement, FinCEN indicated that, during the next 30
days, it will assess its options to further modify deadlines for
certain lower-risk entities. FinCEN also indicated that it intends
to revise the Reporting Rule later this year to reduce the burden
on lower-risk entities, including many small businesses. FinCEN did
not provide additional detail as to which types of entities it will
consider lower-risk for purposes of further extension or
modification; however, FinCEN indicated that it will provide an
update regarding any such modifications prior to the March 21
reporting deadline.
Litigation over the CTA and the Reporting Rule is ongoing, and may result in further developments that could affect the reporting obligations and deadlines for reporting companies. In addition to the ongoing litigation, there is a recent congressional proposal that, if enacted, could result in the extension of compliance deadlines for reporting companies formed prior to January 1, 2024.
For the time being, however, almost all reporting companies are required to file beneficial ownership reports in accordance with FinCEN's newly announced deadlines. Companies that are subject to the CTA's reporting requirements, and have not yet filed initial or updated beneficial ownership reports, should immediately take steps to prepare and file such reports prior to the applicable deadline.
Footnote
1 Reporting companies that may be subject to extended deadlines (e.g., pursuant to prior FinCEN disaster relief actions) or for which the specific reporting companies or beneficial owners are covered by injunctions in other ongoing litigation would not be subject to the March 21, 2025 deadline.
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