Updated December 27, 2024 - CTA Update: All Reporting Deadlines Suspended

In a continuing series of dizzying judicial moves, the 5th Circuit Court of Appeals (on December 27, 2024), vacated the stay issued just three days prior and reinstated the nationwide preliminary injunction enjoining enforcement of the Corporate Transparency Act (CTA) and the Reporting Rule, including the impending reporting deadlines. The appellate court said it was taking such action in order to preserve the constitutional status quo while that court considers the parties' weighty substantive arguments in an expedited appeal.

As a result, no filings under the CTA are currently required by law, including the initial beneficial ownership information (BOI) reports of companies formed or registered prior to 2024 that were due by Jan. 13, 2025.

The 5th Circuit of Appeals also entered an expedited briefing schedule on the case, to be completed by February 28, 2025, with oral arguments scheduled for March 25, 2025. The Court intends to consider the constitutionality of the CTA in this appellate process. Thus, business can delay filing any information with FinCEN until a decision is issued by the Fifth Circuit.

Overview of the Corporate Transparency Act (CTA)

Designed to crack down on money laundering and financial crimes, the Corporate Transparency Act aimed to create more accountability for corporations. But on December 3, 2024, a federal district court put a nationwide pause on the enforcement of the Corporate Transparency Act (CTA) and its regulations by issuing a preliminary injunction.

This includes the reporting deadline that was scheduled for January 1, 2025 and other reporting requirements under the CTA. The defendants have appealed the injunction. It’s unclear how long the court of appeals will take to review the issues and make a final decision about the injunction and what happens to the CTA.

The CTA's regulatory body, the Financial Crimes Enforcement Network (FinCEN), has posted a notice to its website acknowledging that reporting companies are not currently required to file their CTA beneficial ownership information with FinCEN.

Additionally, they will not be subject to liability if they fail to do so while the preliminary injunction remains in effect. FinCEN notes that reporting companies may continue to voluntarily submit beneficial ownership information reports.

Let’s dive into this controversy to understand what you need to do for your business.

What’s the CTA all about?

The Corporate Transparency Act (CTA) is a new federal law that requires most business owners to disclose information about their owners and controllers to the Financial Crimes Enforcement Network (FinCEN).

Congress passed the law to crack down on anonymous shell companies, which have long been the vehicle of choice for money laundering and tax evasion. The new law required most businesses in the United States to designate all beneficial owners of their company by January 1, 2025, or face the potential for hefty fines.

Nearly all types of businesses (corporations, LLCs, LLPs, etc) created by filing a document with a secretary of state were subject to the requirements of the CTA. Exceptions applied, but they were fairly narrow and specific and focused mostly on companies already subject to state or federal reporting regimes.

The CTA required disclosure of all “beneficial owners” of your company. The term “beneficial owner” was tricky, too, and it didn’t just mean the person or persons who owned the company. Beneficial owner was defined as anyone who:

Owned or controlled 25% or more of the company, or
Exercised substantial control over the company (directly or indirectly).

This could include shareholders, executives, or even key decision-makers in smaller businesses. Your company could have more than one beneficial owner, and all needed to be reported.

Reports were to be filed electronically with FinCEN.

What’s the Court Case All About?

In Texas Top Cop Shop v Garland et al. ( case 4:24-cv-00478 December 3, 2024), the U.S. District Court for the Eastern District of Texas issued a nationwide preliminary injunction against the enforcement of the Corporate Transparency Act (CTA), questioning its constitutionality and its impact on small businesses.

The Court opinion strongly rebuked the CTA for overstepping constitutional boundaries. Typically, corporate regulation has traditionally fallen within the states' jurisdiction. By mandating federal oversight of corporate ownership, the CTA disrupts the balance of power.

Furthermore, the court found that the act burdens businesses with significant compliance costs—projected to exceed $22 billion in the first year alone—without clear safeguards against misuse of collected data.

What Should I Do Now?

For Businesses That Have Filed with FinCEN:

Pause your compliance efforts. The injunction currently halts enforcement of the CTA. While FinCEN may appeal, no immediate action is required at this stage.

Monitor legal and administrative developments. Stay updated on litigation outcomes and any policy shifts under the next administration. Consult a business attorney for guidance in this arena.

Maintain and protect your data. Keep detailed records of your previously submitted beneficial ownership information and supporting documents.

For Businesses That Have Not Filed with FinCEN:

Delay your filing. The nationwide injunction means that no business is currently required to comply with the CTA, but further guidance or court decisions could reinstate the act’s enforceability.

Monitor the appeal process. Keep abreast of the appeal process and any court decisions that may affect the injunction's status and your reporting responsibilities.

Prepare for potential compliance. If the injunction is overturned on appeal, businesses may need to act quickly to meet reporting deadlines. Having compliance mechanisms in place will help mitigate risks.

Frequently Asked Questions About the Corporate Transparency Act (CTA)

How does the injunction impact businesses that missed the initial filing deadline?

Businesses that missed the January 1, 2025 deadline are not currently required to file due to the injunction. However, it’s essential to stay informed about the appeal process, as the deadline could be reinstated if the injunction is overturned.

Is the injunction likely to be overturned?

It’s hard to predict the outcome of the appeal. The appellate court could overturn, uphold, or modify the injunction. Businesses should prepare for potential compliance requirements in case the injunction is lifted.

Are there penalties for businesses that voluntarily filed with FinCEN during the injunction?

No, there are no penalties for businesses that voluntarily submitted beneficial ownership information during the injunction period. Voluntary filings remain valid and on record with FinCEN.

Are businesses created after January 1, 2025, subject to the CTA?

If the injunction remains in place, new businesses are not required to file under the CTA. However, if the injunction is lifted, compliance may become mandatory for all applicable entities, including newly formed ones.

How can businesses stay updated on developments regarding the CTA?

Regularly monitor updates from FinCEN and trusted legal sources. You can also subscribe to The Retail Law Group’s newsletter for the latest insights and guidance.

What legal challenges to the CTA remain unresolved?

The main arguments against the CTA include its constitutionality, the burden on small businesses, and concerns over data privacy and misuse. These issues are likely to play a key role in the ongoing appeal.

Let Us Help You Stay Ahead

Legal battles like this can be confusing and stressful, but you don’t have to navigate it alone. At The Retail Law Group, we specialize in helping businesses understand and comply with complex regulations like the CTA.

Whether you need guidance on next steps, help preparing for potential compliance, or just want to stay informed, we’re here for you. Contact us today to ensure your business is ready for whatever happens next.

The Corporate Transparency Act – Now What?