A court ruling in the Eastern District of Texas has ruled that beneficial ownership information (BOI) reporting requirements under the Corporate Transparency Act (CTA) are back in effect. And, as the government promised, companies have been granted a little extra time to file.
Court Ruling
On February 5, 2025, the Department of Justice filed an appeal in Smith v. U.S., one of two CTA winding through the court system in Texas. In its appeal, the government sought to stay an earlier preliminary injunction that would prohibit FinCEN from enforcing the CTA. In Smith, Judge Jeremy D. Kernodle, initially found that the plaintiffs “have demonstrated that the CTA and its implementing rule are likely unconstitutional, that they face a substantial risk of irreparable harm absent an injunction, and that the balance of equities and public interest support preliminary relief.” As a result, a nationwide injunction was issued, temporarily stopping the effective date of the reporting rules while the lawsuit was pending.
The government appealed, pointing to a recent victory in the Supreme Court in another Texas court, Texas Top Cop Shop, Inc., et al. v. Garland, et al. The government also asked for a stay of the injunction while the matter is pending. The majority of the appeal is the same kinds of arguments that won the day at the Supreme Court—and the government noted as much, writing, “The same result is warranted here.”
The lower court agreed. On February 17, Judge Kernodle issued his ruling noting, “In light of the Supreme Court’s order in McHenry v. Texas Top Cop Shop, Inc.… the Court has determined that the motion should be, and hereby is, GRANTED. The Court’s January 7, 2025 order granting preliminary relief is STAYED pending the disposition of the appeal.”
That means there are currently no legal roadblocks in the way of the reporting requirements and companies are once again required to file.
FinCEN response
In its brief for Smith, the government argued that Financial Crimes Enforcement Network—called FinCEN—intended to extend the compliance deadline. A Treasury official confirmed at the time that the extension would apply to all reporting companies for all reporting companies 30 days from the date a stay was granted.
That’s exactly what happened.
This week, FinCEN noted on its website that “[b]eneficial ownership reporting requirements are back in effect, with a new deadline of March 21, 2025 for most companies.”
In a longer notice posted to its website, FinCEN confirmed that it is “generally extending the deadline 30 calendar days from February 19, 2025, for most companies.” The updated deadline for most companies—those required to file by January 1, 2025—is March 21, 2025.
Reporting companies that were previously given a reporting deadline later than the March 21, 2025 deadline, must file their initial BOI report by that later deadline. For example, explains FinCEN, if a company’s reporting deadline is in April 2025 because it qualifies for disaster relief, it should follow the April deadline, not the March deadline.
One group of businesses is still exempt from filing—for now. The ruling in National Small Business United v. Yellen, a lawsuit filed by the National Small Business United (also known as the National Small Business Association, or NSBA), is still good law for those plaintiffs, but does not extend nationwide. That means that Isaac Winkles, reporting companies for which Isaac Winkles is the beneficial owner or applicant, the National Small Business Association, and members of the National Small Business Association as of March 1, 2024—are not currently required to report. In that case, U.S. District Judge Liles C. Burke of the Northern District of Alabama, Northeastern Division, ruled that the CTA was unconstitutional. The government appealed the ruling to the Eleventh Circuit, and oral arguments were heard in October 2024. A final ruling is expected any day.
More Changes Coming
Arguments against the CTA suggest that the reporting requirements are over broad and burdensome for some small businesses. The government appeared to address those concerns in its earlier filing in Smith, suggesting that if the stay were granted, during the 30 days, “FinCEN will assess whether it is appropriate to modify the CTA’s reporting requirements…”
A Treasury official noted at the time that “in keeping with Treasury’s commitment to reducing regulatory burden on businesses,” the agency would “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.”
FinCEN gave a nod to its intention to do just that in the most recent statement on its website, writing, “FinCEN will assess its options for further modifying deadlines.”
Other Cases
Top Shop and Smith aren’t the only cases pending in the courts.
In addition to National Small Business, and Smith, two other courts—the United States Court of Appeals for the Fourth Circuit (Community Associations Institute, et al. v. Yellen) and the United States Court of Appeals for the Ninth Circuit (Firestone et al v. Yellen)—also have CTA case appeals on their dockets. In both cases, the courts declined to issue a preliminary injunction on behalf of plaintiffs challenging the constitutionality of the CTA.
Congress Finally Speaks Up
On February 10, the House unanimously passed H.R. 736, the Protect Small Business from Excessive Paperwork Act. The bill would postpone the BOI reporting deadline for one year for most companies (those reporting companies formed or registered before January 1, 2024). Under the bill, the new reporting deadline would be January 1, 2026.
The bill, introduced by Rep. Zachary Nunn (R-Iowa), was introduced on January 24, 2025, and moved quickly through the House, resulting in 40 minutes of debate Monday before the roll call. The vote was 408-0. Twenty-five House members—11 Republicans and 14 Democrats—did not vote. (You can see how your Representative voted here.)
H.R. 736 is intended to alleviate the chaos that has marked the implementation of the Corporate Transparency Act (CTA). The bill has been moved to the Senate Committee on Banking, Housing, and Urban Affairs. It is not certain when—or if—the Senate may move the bill to the floor for a vote.
Corporate Transparency Act Background
The CTA was passed in 2021 as part of the National Defense Authorization Act for Fiscal Year 2021. The law requires certain companies to file reports identifying a company’s beneficial owners with FinCEN. There is no fee to file, but the reporting requirements do require a number of disclosures about ownership and control of businesses.
The CTA was passed to combat illegal activities, including tax fraud, money laundering, and financing for terrorism. The idea is that requiring businesses to disclose their ownership makes it harder for criminals and other bad actors to hide behind shell companies and complicated business structures.
For purposes of the CTA, reporting companies can be domestic companies created under the laws of a state or Indian tribe or entities formed under the law of a foreign country registered to do business in any state or tribal jurisdiction. This can include limited partnerships, limited liability partnerships (LLPs), business trusts, LLCs (including SMLLCs), and corporations—typically, any entity you would register with the state.
Some companies—23 different kinds—are exempt from reporting. These generally include entities already required to register their ownership with the federal government, such as public companies and tax-exempt entities.
(You can find out more about who may need to report here.)
The Department of the Treasury officially began accepting beneficial ownership information (BOI) reports on January 1, 2024, but the rollout was marked with considerable confusion and opposition. Last summer, a Corporation Service Company (CSC) survey of 200 general counsels, corporate secretaries, and other senior in-house legal and compliance executives from across a broad range of industries in the U.S., Continental Europe, the U.K., and APAC, found that the overwhelming majority (83%) were concerned about their own organization’s compliance with the CTC. Over three quarters (76%) believed the CTA is more broadly causing concern among U.S. businesses. Just 1% of those surveyed had no concerns about their organization’s CTA compliance.
Reactions
Reactions to the most recent ruling have been initially subdued (perhaps because there are so many other legal maneuverings in the news).
However, Ian Gary, executive director of the Financial Accountability and Corporate Transparency (FACT) Coalition, a non-partisan alliance of more than 100 state, national, and international organizations working to combat the harmful impacts of corrupt financial practices, cheered the result in a statement, “With the removal of this final roadblock to enforcement of the Corporate Transparency Act, Treasury is now once again free to continue its full and faithful implementation of the most important anti-money laundering law of the past two decades. Today’s order, and the government’s continued strong defense of the CTA, serves as a reminder that cracking down on the money launderers enabling fentanyl trafficking and other crimes cannot wait.”
Similarly, Scott Greytak, director of advocacy for Transparency International U.S., said in a statement, “As anticipated, the federal court in Texas has allowed the enforcement of this landmark law, in alignment with the Supreme Court’s recent decision. Treasury should move swiftly to make sure that this vital national security law is fully enforced, and that America’s law enforcement officials are armed with the tools necessary to cut off the flow of dirty money from transnational criminals into the U.S.”
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