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A Halt in the Corporate Transparency Act

Just over four years ago, Congress enacted the Corporate Transparency Act (CTA) to address concerns with money laundering, drug trafficking and other illegal activities. Congress did so with the idea that gathering Beneficial Ownership Information (BOI) from businesses would help curb these illegal actions. But since the CTA’s enactment, it has faced questions and controversy from impacted businesses and their owners, as well as tax practitioners. This uncertainty pales in comparison to the recent volatility with the Corporate Transparency Act, for which filing has been delayed, explored below.

Reporting on the Beneficial Ownership Information

Required reporting on the Beneficial Ownership Information for entities is done with the Financial Crimes Enforcement Network Agency (FinCEN) under the Treasury Department. FinCEN is the same agency that manages the FBAR reporting required for foreign bank and investment accounts.

FinCEN provided detailed explanations and an online filing platform to facilitate reporting, but even so, many questions remained on how this filing would be handled and whether impacted parties would comply. As the deadline (January 1, 2025) for the CTA reporting loomed, some business groups challenged the constitutionality of the CTA in court. Concurrently, certain trade associations lobbied Congress to modify the law to address their concerns or delay its effective date.

Recent Developments

As the deadline approached and efforts to delay or modify the CTA implementation seemed unlikely, many businesses and advisors gathered information needed to comply. Then, on December 3, 2024, a District Court in Texas issued a ruling on the CTA that started a chain reaction between the courts and FinCEN.

The U.S. District Court for the Eastern District of Texas issued an order that granted a nationwide injunction that suspended the required reporting under the CTA. FinCEN immediately published an alert that businesses and impacted parties could file BOI reports, but the filing was voluntary and not required.

The government appealed this order to the Fifth Circuit Court of Appeals on December 5, 2024 and asked for a stay on the injunction. On December 23, 2024, an Emergency Motions Panel of the Fifth Circuit granted a stay of the injunction.

FinCEN, soon after, extended the deadline for the BOI filing due to the original filing date being less than two weeks away. The new deadline was extended to January 13, 2025.

Three days later the decision was appealed to a separate Merits Panel of the Fifth Circuit; and on December 26, 2024, the panel reinstituted the nationwide injunction against the CTA. It also scheduled an expedited review of the case for March 2025. This swift reversal put the CTA reporting on hold again. Because of this decision from the Fifth Circuit, FinCEN announced it would allow for voluntary filing of the BOI reporting until these matters were resolved in court.

Finally, on December 31, 2024, the government appealed to the U.S. Supreme Court. On January 23, 2025, the U.S. Supreme Court later ruled to lift the injunction and allow the CTA to go into effect pending review of the merits in the case in the Fifth Circuit

The Supreme Court’s Ruling and Other Cases

While this recent Supreme Court ruling would seem to reinstate the CTA filing requirements, it does not. To further confuse the situation, there was a separate case that challenged the constitutionality of the CTA also from the Eastern District of Texas that has not been resolved. This case was handled by a different judge. On January 7, 2025, this judge issued a national ban on implementing the CTA. This separate decision was not appealed by the federal government and seems to still be in effect, despite the Supreme Court’s decision on the first Texas case.

Given all of these developments, FinCEN updated its website on January 24, 2025 stating that it is allowing for voluntary CTA filings. The requirement to file is delayed until this open case is resolved. The following was included in the latest FinCEN alert:

“On January 23, 2025, the Supreme Court granted the government’s motion to stay a nationwide injunction issued by a federal judge in Texas (Texas Top Cop Shop, Inc. v. McHenry—formerly, Texas Top Cop Shop v. Garland). As a separate nationwide order issued by a different federal judge in Texas (Smith v. U.S. Department of the Treasury) still remains in place, reporting companies are not currently required to file beneficial ownership information with FinCEN despite the Supreme Court’s action in Texas Top Cop Shop. Reporting companies also are not subject to liability if they fail to file this information while the Smith order remains in force. However, reporting companies may continue to voluntarily submit beneficial ownership information reports.”

Next Steps

It is uncertain what position the Justice Department under the new Administration will take on the CTA and these legal challenges. Congress could still step in and possibly defer the effective dates of the CTA or make other changes to this law.

This roller coaster of activity has caused uncertainty and confusion for many businesses and tax practitioners. Even with this ruling from the U.S. Supreme Court, many questions remain. For companies that have filed their CTA reports, there is no further action required. Those that have not yet filed could opt to file voluntarily now or wait for further guidance from FinCEN after these matters are resolved. We will continue to monitor these developments.

To learn more about BOI reporting, refer to FinCEN’s Frequently Asked Questions. Please contact our team to learn more about the changes with the CTA.

About Our Authors

Tom Bayer, CPA, CExP, has specialized expertise in the areas of business succession planning, tax planning and compliance, and business advisory. He has deep experience providing a range of accounting, tax, and business advisory services to commercial clients across industries.

Jim Brandenburg, CPA, MST, possesses extensive experience and knowledge in corporate and partnership tax law, mergers and acquisitions, and tax legislation. His expertise includes working with owners of closely held businesses to identify tax planning opportunities and assist them in implementing these strategies.

Elena Mossina, J.D., LL.M., is the principal of Sikich’s International Tax practice. She is a tax attorney with experience in advising U.S. multinational clients on a wide range of international and domestic tax issues. Her experience includes cross-border restructurings, cash repatriation strategies, IP migrations and transfer pricing matters. She combines U.S. and foreign tax analysis to provide clients with the most advantageous integrated solution from a U.S. and a foreign tax perspective.

Lesley Keller, CPA, MT, AEP®, is a director who provides tax consulting and compliance services to clients in a variety of industries, including manufacturing and distribution, real estate, professional and technology services, and not-for-profit organizations. She advises individuals, trusts, estates and closely held businesses with U.S. and state taxation and reporting with a focus on international transactions, assets and investments.

This publication contains general information only and Sikich is not, by means of this publication, rendering accounting, business, financial, investment, legal, tax, or any other professional advice or services. This publication is not a substitute for such professional advice or services, nor should you use it as a basis for any decision, action or omission that may affect you or your business. Before making any decision, taking any action or omitting an action that may affect you or your business, you should consult a qualified professional advisor. In addition, this publication may contain certain content generated by an artificial intelligence (AI) language model. You acknowledge that Sikich shall not be responsible for any loss sustained by you or any person who relies on this publication.

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