Update Corporate Transparency Act Reporting Resumes
The Corporate Transparency Act (CTA) reporting regime is back on as of February 20, 2025. The CTA is a U.S. law that requires certain companies to report their beneficial ownership information to the Financial Crimes Enforcement Network (FinCEN) to enhance transparency and combat financial crimes like money laundering. While the enforcement of the CTA faced legal challenges, including a nationwide preliminary injunction in December 2024 that temporarily halted it, the most recent development has reinstated the reporting requirements.
Specifically, the U.S. District Court for the Eastern District of Texas granted a stay on the previous injunction, making the CTA’s reporting obligations mandatory once again.
Here’s what this means for businesses:
- Who Must Comply: Most small and medium-sized businesses formed as corporations, LLCs, or similar entities are required to file Beneficial Ownership Information (BOI) reports with FinCEN.
- Deadlines: Companies formed before January 1, 2024, must submit their initial BOI reports by March 21, 2025. Companies formed on or after January 1, 2024, have 90 days from their creation date to file.
- Penalties: Failure to comply with these reporting requirements could lead to civil or criminal penalties.
Businesses should take immediate steps to understand their obligations under the CTA, as the reporting regime is now active. However, it’s worth noting that ongoing legal challenges could potentially affect its status in the future, so staying updated on any new developments is advisable.
For now, the CTA reporting requirements are in full effect.
Please contact Simin Wang at wang@carneylaw.com if you have any questions, need further support, or would like us to connect you with a third-party service to help you file.
Reporting Requirement Update From Carney Badley Spellman
In December 3, 2024, the U.S. District Court for the Eastern District of Texas issued a nationwide preliminary injunction, pausing enforcement of the Corporate Transparency Act (CTA).
The court noted that “reporting companies need not comply with the CTA’s January 1, 2025, BOI reporting deadline pending further order of the Court.”
This is not a final decision to eliminate the CTA or its reporting requirements. We believe this means that CTA enforcement and filing obligations are on hold temporarily, pending further court rulings or an appeal to the U.S. Court of Appeals for the Fifth Circuit. But the good news is that companies do not need to meet the January 1, 2025, BOI (beneficial ownership information) filing deadline.
As of today, FinCEN has issued the following alert on its website. We are closely monitoring new developments and will share any updates.
Reporting Requirement Update From FinCEN
Alert: Impact of Ongoing Litigation – Deadline Stay – Voluntary Submission Only
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.
The Corporate Transparency Act (CTA) plays a vital role in protecting the U.S. and international financial systems, as well as people across the country, from illicit finance threats like terrorist financing, drug trafficking, and money laundering. The CTA levels the playing field for tens of millions of law-abiding small businesses across the United States and makes it harder for bad actors to exploit loopholes in order to gain an unfair advantage.
On Tuesday, December 3, 2024, in the case of Texas Top Cop Shop, Inc., et al. v. Garland, et al., No. 4:24-cv-00478 (E.D. Tex.), a federal district court in the Eastern District of Texas, Sherman Division, issued an order granting a nationwide preliminary injunction that: (1) enjoins the CTA, including enforcement of that statute and regulations implementing its beneficial ownership information reporting requirements, and, specifically, (2) stays all deadlines to comply with the CTA’s reporting requirements. The Department of Justice, on behalf of the Department of the Treasury, filed a Notice of Appeal on December 5, 2024.
Texas Top Cop Shop is only one of several cases in which plaintiffs have challenged the CTA that are pending before courts around the country. Several district courts have denied requests to enjoin the CTA, ruling in favor of the Department of the Treasury. The government continues to believe—consistent with the conclusions of the U.S. District Courts for the Eastern District of Virginia and the District of Oregon—that the CTA is constitutional.
While this litigation is ongoing, FinCEN will comply with the order issued by the U.S. District Court for the Eastern District of Texas for as long as it remains in effect. Therefore, reporting companies are not currently required to file their beneficial ownership information with FinCEN and will not be subject to liability if they fail to do so while the preliminary injunction remains in effect. Nevertheless, reporting companies may continue to voluntarily submit beneficial ownership information reports.
Prior Article from Carney Badley Spellman
FinCEN BOI Filing – Year-end Deadline
The purpose of this email is to alert you that the Corporate Transparency Act (the “CTA”) (a law passed by Congress) may apply to you or one or more of the businesses you are involved with. It is important for you to determine your obligations under the law and act because the penalties for non-compliance are steep.
In very broad strokes, the CTA requires every business entity that’s not exempt to file information regarding the entity’s “beneficial owners” with a database maintained by the Treasury Department’s Financial Crimes Enforcement Unit (FinCEN).
If your company was formed before January 1, 2024, the filing deadline is January 1, 2025, unless the company is exempt. You can find a list of the 23 exemptions here. The most common exemption is for large operating companies with over 20 full-time U.S. employees, a U.S. office, and more than $5 million in U.S. gross receipts from the prior year.
You can file via the FinCEN BOI e-filing system.
Please see the FAQs here or refer to the compliance guide for assistance.
Beneficial owners include:
- Senior officers (CEO, President, COO, CFO, General Counsel, etc.)
- Directors (including Managers of an LLC)
- Shareholders owning 25% or more
- Other beneficial owners (as defined on pages 16-28 of the compliance guide)
To file, you must gather the following details from each beneficial owner:
- Full legal name
- Complete address
- Date of birth
- Valid state ID, driver’s license, or passport number
- Photocopy of the ID or passport
After the initial filing, each company has an ongoing obligation to update the filing within 30 days if:
- A new beneficial owner is added, such if an officer or director is replaced, or
- A beneficial owner’s information changes, such as moving their home address or getting a new ID or passport number.
Alternatively, beneficial owners can obtain their own FinCEN numbers, simplifying the process and avoiding any privacy concerns. Beneficial owners would then have the obligation to file an update within 30 days of their own information changing.
Please contact Simin Wang at wang@carneylaw.com if you have any questions, need further support, or would like us to connect you with a third-party service to help you file.
Disclaimer: This information has been prepared and published for informational purposes only and should not be construed as legal advice or constitute a client-attorney relationship.
