After a few days on a legal roller coaster, enforcement and reporting obligations under the Corporate Transparency Act (CTA) remain on hold as lawsuits challenging the CTA’s constitutionality continue.
On Jan. 23, 2025, the U.S. Supreme Court granted the U.S. government’s application for a stay to set aside a nationwide injunction previously issued by the U.S. District Court for the Eastern District of Texas in Texas Top Cop Shop, Inc. v. Garland. This order would have reinstated CTA reporting obligations and enforcement. However, in a separate case, Smith v. U.S. Department of the Treasury, a different federal judge sitting in the U.S. District Court for the Eastern District of Texas issued a stay that suspends the effective date for reporting obligations under the CTA nationwide until that litigation is resolved.
These conflicting rulings left the CTA in a confusing limbo until the Financial Crimes Enforcement Network (FinCEN), the agency charged with adopting the CTA’s implementing regulations and enforcing the CTA, issued a notice on Jan. 24, to clarify its stance.
Reporting companies are not required to file beneficial ownership information (BOI) reports under the CTA and are not subject to liability for failing to file while the Smith order remains in force. FinCEN confirmed that companies may continue to voluntarily submit BOI reports if they wish to do so.
As we’ve seen, the CTA landscape may change rapidly. Warner’s CTA task force continues to recommend that companies assemble the information that they will need to file their reports if/when filing obligations resume. For an explanation of the CTA and the information that must be reported, please see our prior eAlert.
