What is the Corporate Transparency Act?

The Corporate Transparency Act ("CTA") requires certain business entities to file information about the company and its beneficial owners ("BOI reports") with the U.S. Treasury Department's Financial Crimes Enforcement Network ("FinCEN").  The CTA applies to "reporting companies," which the CTA broadly defines as an entity that is created by the filing of a formation document with a secretary of state or similar office under the law of a state, or formed under the law of a foreign country and required to be registered to do business in the United States by the filing of a document with a secretary of state or similar office under the laws of a state.  FinCEN originally set a deadline of January 1, 2025 for reporting companies formed before January 1, 2024 to file their initial reports.  Reporting companies formed after January 1, 2024 were required to file their initial reports with FinCEN within 90 days of formation.

The Fifth Circuit Court of Appeals Pauses Enforcement of the CTA

On December 3, 2024, a federal district court in the Eastern District of Texas issued a nationwide preliminary injunction preventing the enforcement of the CTA and staying all deadlines to comply with the CTA's reporting requirements.  On December 23, 2024, a panel of judges on the Fifth Circuit Court of Appeals overturned the Texas district court's preliminary injunction—effectively reinstating the CTA and deadlines for reporting companies.

However, on December 26, 2024, another panel of judges on the Fifth Circuit vacated the December 23, 2024 stay of the preliminary injunction.  Consequently, the CTA's enforceability has again been paused.  Reporting companies are not currently required to comply with the CTA's deadlines, and will not be penalized for failing to do so while the order is in force.  However, reporting companies may voluntarily submit BOI reports to FinCEN.

On December 31, 2024, FinCEN filed an application for a stay of the December 3, 2024 injunction with the United States Supreme Court.

What Should Business Owners Know?

Although the CTA's reporting requirements and deadlines are not currently in effect, reporting companies could be required to file BOI reports if the Supreme Court grants FinCEN's December 31, 2024 application for a stay.  Accordingly, reporting companies should be prepared to file BOI reports with FinCEN in case enforcement resumes.

How Newmeyer Dillion Can Help

Newmeyer Dillion can assist with filings with FinCEN and compliance with the CTA, as well as entity formation, qualifications and corporate maintenance.  We are closely monitoring all developments related to FinCEN regulations and keeping our clients informed. Currently, there are several cases that have challenged the CTA pending before courts around the country.