Updated Developments in Reporting Requirements Under the Federal Corporate Transparency Act

• Pages: 10-10
• Date: 01 January 2025
• Published date: 01 January 2025
• Author: Marc K. Cohen,Sara Schroeder
• Subject Matter: Administrative & Public Law

Updated Developments in Reporting Requirements

Under the Federal Corporate Transparency Act

ecently we advised you

that under the Corporate

Transparency Act (CTA)

every business entity orga-

nized as a corporate entity

or limited liability company (LLC) was

required to report to the Department

of the Treasury, through the Financial

Crimes Enforcement Network (FinCEN),

specif‌ied ownership and managerial

information. This report was due to

be f‌iled electronically no later than

January 1, 2025.

As of December 28, here’s where

things stand on the Treasury require-

ments to report management and

ownership interests. The tidal sands

underpinning the CTA continue to

shift—and rapidly. On December 23,

2024, the U.S. Court of Appeals for

the Fifth Circuit, on motion, issued a

stay of the district court’s preliminary

injunction, pending the f‌inal outcome

of the Texas Top Cop case.

That same day FinCEN issued a

new notice providing for a short grace

period but requiring that all covered

companies f‌ile their CTA reports.

Then the tide turned again. On

December 26, the Fifth Circuit’s merits

panel vacated the motions panel’s stay

of the district court injunction with a

simple order:

“In order to preserve the constitu-

tional status quo while the merits panel

considers the parties’ weighty substan-

tive arguments, that part of the motions-

panel order granting the Government’s

motion to stay the district court’s prelim-

inary injunction enjoining enforcement of

the Corporate Transparency Act and the

Reporting Rule is VACATED.”

FinCEN the next day issued this notice:

“[A]s of December 26, 2024, the

injunction issued by the district court in

Texas Top Cop Shop, Inc. v. Garland is

in eect and reporting companies are

not currently required to f‌ile benef‌icial

ownership information with FinCEN.”

Conclusion

Is this the f‌inal word on a company’s

requirement to report its ownership and

BY MARC K. COHE N AND SARA SCH ROEDER , INSURAN CE COVERAGE LITI GATION COMMITTE E

management information to FinCEN?

Probably not. The Fifth Circuit may

next hear the case en banc or it may

be appealed to the Supreme Court. In

addition to Texas Top Cop, the litigation

in the other federal circuits is ongoing.

Furthermore, a new Secretary of the

Treasury will be sworn in toward the

end of January. So, unfortunately, nearly

33 million companies will have to remain

alert to continuing developments in the

CTA, as well as the ongoing duty to cor-

rect and update the information they

have already provided to FinCEN.

Further Background

Under the CTA, every business entity

organized as a corporation or LLC was

required to report to the Department

of the Treasury, through FinCEN, speci-

f‌ied ownership and detailed managerial

information. According to Treasury’s

implementing regulations, this report

was due to be f‌iled electronically no

later than January 1, 2025. The burden

of these reporting requirements was

imposed on over 32 million business

entities, ranging from nationwide enter-

prises to tiny homeowners’ associa-

tions and from professional practices

to neighborhood stores and small busi-

ness contractors. With few exceptions,

the only requirement to become a cov-

ered entity under the CTA was to be an

active corporation or LLC.

Convinced that this unwarranted

intrusion into long-held expectations

of privacy was unconstitutional, many

companies and their national associa-

tions challenged the CTA and Treasury’s

implementing regulations. At this point

in time, there are pendin, challenges

to the constitutionality of the CTA and

Treasury’s regulations in at least four

federal circuits. The most advanced

case on the federal dockets is Texa s

Top Cop Shop, Inc., et al. v. Garland, et

al. (E.D. Tex.). At the conclusion of liti-

gation, on the request for preliminary

relief, the district court issued a pre-

liminary injunction prohibiting Treasury,

nationwide, from requiring the CTA

reports from all covered entities.

In response to the Texas Top Cop

preliminary injunction, Treasury issued

a notice

indicating that all reporting

requirements were suspended and

then immediately appealed the pre-

liminary injunction.

*UPDATE (as of February 28,

2025): Since the original publica-

tion of this article, the status of

the CTA shifted again. On Monday,

February 17, 2025, the last judicial

impediment to the enforcement of

the Corporate Transparence Act

was lifted. The next day, FinCEN

announced that the new due date

for most suspended Benef‌icial

Ownership Information (BOI) f‌ilings

is March 21, 2025.

This article i s only intended as a review

of typical fa cts and basic law. Its pur pose is

to help spot issu es for discussion and f ur-

ther inquir y. It is not a substitute for obta in-

ing advice from yo ur legal counsel, oth er

sources of auth oritative expertise. or t he

government o cials responsible fo r admin-

istering thes e laws.

The reader is a dvised that laws, regul a-

tions and esp ecially published po licies of

state and fede ral agencies are cons tantly

subject to am endment and change s in inter-

pretation. Fi nally, reliance on this ar ticle in

setting prac tice protocols or as a defen se to

government ac tion is further limi ted in that

audit and enfo rcement actions are a lways,

to some degree , subject to the discretio n of

government ocials.

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