Key Takeaways:
- On February 18, 2025, the last remaining nationwide preliminary injunction of the Corporate Transparency Act ("CTA") issued by a federal judge in the U.S. Federal District Court for the Eastern District of Texas in Smith v. U.S. Department of the Treasury ("Smith") was lifted.
- As a result, beneficial ownership information ("BOI") reporting obligations under the CTA are back in effect.
- In response, the U.S. Treasury Department's Financial Crimes Enforcement Network ("FinCEN") has extended the filing deadline to March 21, 2025, for most reporting companies and indicated that it may extend the deadline further and is also considering revising its beneficial ownership information reporting rule (potentially including additional reporting exemptions aimed at small businesses).
On February 18, 2025, the U.S. Federal District Court for the Eastern District of Texas lifted the last remaining nationwide preliminary injunction of the CTA in the Smith case. This follows a decision on January 23, 2025, by the U.S. Supreme Court that stayed a nationwide preliminary injunction of the CTA previously issued by another federal district court in the Eastern District of Texas in Texas Top Cop Shop, Inc. v. McHenry—formerly, Texas Top Cop Shop v. Garland. As previously covered, the Supreme Court's ruling did not address the nationwide preliminary injunction issued in Smith and so the BOI reporting obligations remained on hold during the pendency of the injunction.
FinCEN's Response
In response to the latest decision in Smith, on February 19, 2025, FinCEN announced an extension of the filing deadline, "For the vast majority of reporting companies, the new deadline to file an initial, updated, and/or corrected BOI report is now March 21, 2025." Certain reporting companies have a later reporting deadline if they qualify for certain disaster relief extensions or are parties to litigation and benefit from an injunction applicable only to the parties in the case (including members of the National Small Business Association (as of March 1, 2024)).
In addition, FinCEN stated that "in keeping with Treasury's commitment to reducing regulatory burden on businesses, during this 30-day period FinCEN will assess its options to further modify deadlines, while prioritizing reporting for those entities that pose the most significant national security risks.
FinCEN also intends to initiate a process this year to revise the BOI reporting rule to reduce burden for lower-risk entities, including many U.S. small businesses." This may involve the creation of additional reporting exemptions.
Congressional Action
On February 10, 2025, the House of Representatives overwhelmingly passed H.R.736 – "Protect Small Businesses from Excessive Paperwork Act of 2025." The bill extends the CTA filing deadline to January 1, 2026, but only for reporting companies formed prior to January 1, 2024. The Senate has not yet taken any action on this legislation.
In addition, there are efforts in Congress to repeal the CTA.
Next Steps
Numerous other court challenges to the CTA continue to work their way through various federal district and appellate courts and may ultimately reach the U.S. Supreme Court again. Reporting companies should continue to monitor developments in these cases and in Congress.
Reporting companies should prepare to file their BOI reports by March 21, 2025, but the question of when to file requires the balancing of several factors. Some reporting companies may wish to wait until closer to the March deadline to see if there are further extensions of time to file and/or additional reporting exemptions. Foley Hoag reminds reporting companies that once an initial filing is made, reporting companies assume an ongoing obligation to notify FinCEN of changes to BOI information.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
