On February 5, 2025, the Department of Justice (DOJ)—on behalf of the Department of the Treasury—filed a notice of appeal of the District Court's order in Smith, et al. v. U.S. Department of the Treasury, et al., 6:24-cv-00336 (E.D. Tex.) and, in parallel, filed a motion to stay that order as the appeal proceeds. In the Smith case, the U.S. District Court for the Eastern District of Texas issued an order enjoining the government from enforcing the Corporate Transparency Act (CTA) against the plaintiffs in the case and staying on a nationwide basis FinCEN's regulations implementing the CTA's beneficial ownership information (BOI) reporting requirements (the "Reporting Rule"). While the District Court's order remains in effect, FinCEN is not enforcing the requirements of the Reporting Rule against any individual or entity. Reporting companies are, therefore, not currently required to file BOI reports with FinCEN, but may continue to voluntarily submit such reports using FinCEN's e-filing system.
In its motion to stay the District Court's order in the Smith case, the DOJ indicated that if the court grants the stay:
FinCEN intends to announce that it will extend the compliance deadline for thirty (30) days. During that period, FinCEN intends to assess its potential options to prioritize reporting for those entities that pose the most significant national security risks while providing relief to lower-risk entities and, if warranted, amending the Final Rule.
These same positions were confirmed by FinCEN in a post to its website on February 6, 2025, which provides:
In light of a recent federal court order, reporting companies are not currently required to file beneficial ownership information with FinCEN and are not subject to liability if they fail to do so while the order remains in force. However, reporting companies may continue to voluntarily submit beneficial ownership information reports.
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On January 7, 2025, in the case of Smith, et al. v. U.S. Department of the Treasury, et al., 6:24-cv-00336 (E.D. Tex.), the U.S. District Court for the Eastern District of Texas, Tyler Division, issued an order enjoining the government from enforcing the CTA against the plaintiffs and staying FinCEN's regulations implementing the CTA's reporting requirements (31 C.F.R. § 1010.380). On February 5, 2025, the Department of Justice—on behalf of the Department of the Treasury (Treasury)—filed a notice of appeal of the district court's order and, in parallel, has sought to stay that order as the appeal proceeds.
If the district court's order is stayed, thereby allowing FinCEN's Reporting Rule to come back into effect, FinCEN intends to extend the reporting deadline for all reporting companies by 30 days. Further, in keeping with Treasury's commitment to reducing regulatory burden on businesses, FinCEN, during that 30-day period, will assess its options to modify further deadlines or reporting requirements for lower-risk entities, including many U.S. small businesses, while prioritizing reporting for those entities that pose the most significant national security risks.
In the meantime, FinCEN is complying with—and will continue to comply with—the district court's order for as long as it remains in effect. As a result, FinCEN is not currently enforcing the CTA against the plaintiffs in that action—Samantha Smith and Robert Means—and their related entities, and FinCEN is also not currently enforcing the requirements of 31 C.F.R. § 1010.380 against any individual or entity. Reporting companies are, therefore, not currently required to file beneficial ownership information with FinCEN. Reporting companies may continue to voluntarily submit beneficial ownership information reports, free of charge, using FinCEN's E-Filing system. More information is available at fincen.gov/boi.
Considering the potential for rapid changes in the requirements and enforcement of the Reporting Rule, reporting companies are well-advised to closely monitor CTA developments.
For More Information
If you have any questions about this Alert, please contact Thomas R. Schmuhl, Jocelyn Margolin Borowsky, Joel N. Ephross, Bruce H. Jurist, Hope P. Krebs, Lee J. Potter Jr., any of the attorneys in our Corporate Transparency Act Strategy Team, the attorney in the firm with whom you are regularly in contact, or Michael A. Gillen or any of the professionals in the Tax Accounting Group.
Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer.
