The Bottom Line
- FinCEN announced that it would not issue any fines or penalties or take any other enforcement actions under the CTA until a forthcoming interim final rule becomes effective.
- In addition, the Treasury Department announced that it will not enforce any penalties or fines against U.S. citizens or domestic reporting companies or their beneficial owners after the forthcoming rule changes take effect.
- The Treasury Department further intends to propose changes that will narrow the scope of the rule to apply to foreign reporting companies only.
- Businesses need to stay informed about the ongoing rulemakings and litigation and be ready for possible changes that could affect their compliance obligations under the CTA.
On February 27, 2025, the U.S. Department of the Treasury's Financial Crimes Enforcement Network (FinCEN) announced that it would halt all enforcement of the Corporate Transparency Act (CTA) based on current deadlines. FinCEN will not issue any fines or penalties or take any other enforcement actions against any companies based on any failure to file or update BOI Reports by the current deadlines. Such actions will not be taken until a forthcoming interim final rule becomes effective and the new relevant due dates in the interim final rule have passed.
The announcement went on to say that FinCEN would issue an interim final rule no later than March 21, 2025 to set deadlines and potentially change the required disclosures.
On March 2, 2025, the Treasury Department announced an additional step: Not only will it decline to enforce any penalties or fines associated with the BOI reporting rules under the existing regulatory deadlines of the CTA, but it will further not enforce any penalties or fines against U.S. citizens or domestic reporting companies or their beneficial owners after the forthcoming rule changes take effect either. The Treasury Department added that it intends to issue a proposed rulemaking that will narrow the scope of the rule to apply to foreign reporting companies only.
Timeline: Prior CTA Developments
Ahead of the original December 31, 2024 deadline for reporting companies, the CTA has faced multiple legal challenges, including lawsuits questioning its constitutionality and enforcement, as outlined by the timeline below.
- December 3, 2024: Judge Amos Mazzant of the United States District Court for the Eastern District of Texas issued a nationwide preliminary injunction halting the enforceability of the CTA and its implementing regulations.
- December 23, 2024: A motions panel of the United States Court of Appeals for the Fifth Circuit stayed the District Court's injunction, which effectively reinstated the beneficial ownership reporting requirement under the CTA. The same day, FinCEN extended the applicable filing deadlines.
- December 26, 2024: The Fifth Circuit vacated the motion panel's order staying the injunction pending its consideration of the constitutionality of the CTA. In issuing its order, the Fifth Circuit noted its desire to maintain the "constitutional status quo" while the proceedings advance. In connection with the ruling, the court issued an expedited schedule for a hearing on the merits, but oral arguments are not scheduled until the end of March 2025.
- January 7, 2025: Judge Jeremy Kernodle of the United States District Court for the Eastern District of Texas heard a second case on the constitutionality of the CTA and issued a separate nationwide preliminary injunction, halting the enforceability of the CTA on different grounds than those relied on by Judge Mazzant.
- January 23, 2025: The Supreme Court stayed the injunction issued by Judge Mazzant pending the disposition of the applicable appeal by the Fifth Circuit. With this action, absent the second injunction, the government would again be permitted to enforce the CTA (and require reporting companies to file beneficial ownership information reports (BOI Reports)). The Supreme Court did not address the injunction against the CTA's reporting rule that was issued by Judge Kernodle.
- February 18, 2025: Judge Kernodle stayed the preliminary injunction he had previously issued against the enforcement of the CTA. This stay allowed the Treasury Department to enforce the CTA. FinCEN set a deadline of 30 calendar days from February 19, 2025, i.e., March 21, 2025, for reporting companies to comply.
Recommendation: Stay Prepared
The FinCEN and Treasury Department announcements do not amend the statutory language of the CTA. With the upcoming release of an interim final rule by FinCEN, potential changes from the Treasury Department, and the pending judicial reviews, additional developments are ahead.
At this time, reporting companies should continue to closely monitor CTA developments. Companies that desire to file during this period may do so.
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.
