A Busy Holiday Season for the Corporate Transparency Act: Litigation Updates and Compliance Pause

By Roddy Stieger, Founder and Partner at Momentus Legal

The Corporate Transparency Act (CTA), enacted as part of the Anti-Money Laundering Act of 2020, aims to curb illicit financial activities by requiring businesses to report beneficial ownership information (BOI) to the Financial Crimes Enforcement Network (FinCEN). As we previously reported here, the CTA mandates that:

1. Existing entities formed before January 1, 2024, submit their initial BOI reports by January 1, 2025.
2. Newly formed entities after January 1, 2024, file their reports within 30 days of formation.
3. Updates to BOI reports be submitted within 30 days of any changes.

These deadlines were set to ensure swift compliance across a broad range of entities. However, recent legal developments have added uncertainty to the CTA’s implementation timeline.

Legal Challenges and Key Updates

In December 2024, a U.S. District Court in Texas issued a nationwide preliminary injunction, halting enforcement of the CTA. This decision was based on constitutional concerns, including potential privacy violations and the scope of FinCEN’s authority.

Key events have since unfolded:

• December 23, 2024: The Fifth Circuit Court of Appeals temporarily lifted the injunction, reinstating the reporting requirements. In response, FinCEN extended the compliance deadline to January 13, 2025.
• December 26, 2024: The Fifth Circuit vacated its earlier stay, reinstating the nationwide injunction and pausing enforcement of the CTA once again.
• December 31, 2024: The Department of Justice filed an emergency application with the U.S. Supreme Court, seeking to lift the injunction and proceed with enforcement during the ongoing appeals process.

As of January 7, 2025, the Supreme Court has not yet ruled on this application, leaving the injunction in place and the reporting requirements on hold.

Practical Implications for Businesses

With enforcement paused but legal challenges ongoing, businesses should adopt a dual approach—being prepared for compliance while acknowledging the current stay.

Steps to Consider:

1. Stay Updated: Monitor FinCEN announcements and legal developments.
2. Maintain Readiness: Ensure BOI records are complete and ready to file if the injunction is lifted.
3. Seek Legal Counsel: Consult professionals to evaluate compliance obligations and potential risks.

Who Needs to Report?

If the injunction is lifted, the CTA will apply to many entities, including:

• Corporations.
• Limited liability companies (LLCs).
• Similar entities registered under state law.

However, certain entities are exempt, such as:

• Publicly traded companies.
• Banks and credit unions.
• Insurance companies.
• Nonprofit organizations.
• Certain trusts and pooled investment vehicles.

What Information Must Be Reported?

Entities required to file must submit the following:

1. Entity Information:
   • Full legal name.
   • Principal business address.
   • State of formation or registration.
2. Beneficial Ownership Information:
   • Full legal name.
   • Date of birth.
   • Current residential or business address.
   • A unique identifying number from a government-issued ID (e.g., passport or driver’s license).

Practical Tips for Compliance

Even with the reporting requirements currently stayed, businesses should proactively prepare for potential compliance:

1. Conduct an Internal Audit: Identify beneficial owners and collect required information.
2. Monitor Legal Developments: Stay informed about court rulings and updates to the CTA.
3. Establish a Reporting Process: Designate a compliance officer or representative to oversee BOI filings.
4. Seek Legal Guidance: Consult with professionals to ensure readiness for potential changes.

The Path Ahead

The Corporate Transparency Act represents a significant shift in reporting requirements for U.S. businesses. However, ongoing litigation has created uncertainty about its future implementation. The outcome of the Supreme Court case will determine whether the CTA’s reporting requirements are reinstated or remain paused pending resolution of broader constitutional challenges.

For now, businesses should monitor developments closely and be prepared to act if enforcement resumes. For further details, check out our prior post on the CTA: Navigating the Corporate Transparency Act: Are You Required to File a BOIR?.

Need Assistance? We’re Here to Help!

Momentus Legal is here to guide you through the CTA reporting process. Whether you have questions about corporate formation, governance, or compliance with the new CTA requirements, we can assist you every step of the way.

Roddy Stieger, Founder and Partner at Momentus Legal

Reach Out:

• Email: roddy.stieger@momentuslegal.com
• Phone: 303.990.2826
• LinkedIn: Roddy Stieger
• Website: momentuslegal.com