Yesterday’s District Court decision lifting the injunction against the Corporate Transparency Act (CTA) is a setback for Main Street.
The Texas court lifted the second and only remaining injunction blocking filing under the CTA, again forcing millions of small (and not-so-small) businesses to report all their beneficial ownership information (BOI) to the Financial Crimes Enforcement Network (FinCEN) or face fines and jail time. As the Court ruled:
In light of the Supreme Court’s order in McHenry v. Texas Top Cop Shop, Inc., the Court has determined that the motion should be, and hereby is, GRANTED. The Court’s January 7, 2025 order granting preliminary relief is STAYED pending the disposition of the appeal.
The result is filing will resume in 30 days, per guidance posted on the FinCEN website today:
With the February 18, 2025, decision by the U.S. District Court for the Eastern District of Texas in Smith, et al. v. U.S. Department of the Treasury, et al., 6:24-cv-00336 (E.D. Tex.), beneficial ownership information (BOI) reporting requirements under the Corporate Transparency Act (CTA) are once again back in effect. However, because the Department of the Treasury recognizes that reporting companies may need additional time to comply with their BOI reporting obligations, FinCEN is generally extending the deadline 30 calendar days from February 19, 2025, for most companies.
So that’s the bad news – the CTA is back in effect.
What’s the silver lining? Several opportunities for success remain. First, bipartisan legislation recently passed the House that would delay filing until the end of the year. A companion bill has been introduced in the Senate by Banking Chair Tim Scott. This legislation is unlikely to move forward on its own, but it could catch a ride on a must-pass bill like the upcoming CR. Yesterday’s ruling could be the catalyst to get that done.
Second, today’s statement from FinCEN also opens the door for further administrative relief:
Notably, in keeping with Treasury’s commitment to reducing regulatory burden on businesses, during this 30-day period FinCEN will assess its options to further modify deadlines, while prioritizing reporting for those entities that pose the most significant national security risks. FinCEN also intends to initiate a process this year to revise the BOI reporting rule to reduce burden for lower-risk entities, including many U.S. small businesses.
What exactly they have in mind is unclear, but both the 30-day grace period and the recognition that the current CTA rules overreach is a massive step forward and a signal that the new Administration intends to take a more business-friendly approach to the CTA. Is a further filing deadline delay part under consideration?
Finally, yesterday’s ruling is not the final say in the courts either. By our count, there are eleven challenges to the CTA pending in federal courts and the lead case – NSBA v. Treasury – is awaiting a decision by the Eleventh Circuit any day now. We have a good chance to win that decision but the case is all but guaranteed to end up before the Supreme Court this year either way.
So the courts might save us from this poorly-conceived law in the end, but in the meantime we need help from the Administration. Vice President Vance and Secretary McMahon have already weighed in against the CTA. Yesterday’s court ruling means it’s time for our friends at Treasury to do the same in a meaningful way.