Client Alert: Corporate Transparency Act Reinstated
Update – Fifth Circuit Grants Government’s Emergency Motion for Stay of Injunction
Date: December 24, 2024
Background and Significance
The CTA, enacted in 2021, requires certain entities to report beneficial ownership information to the Financial Crimes Enforcement Network (FinCEN) to enhance transparency and combat financial crimes. On December 3, 2024, the U.S. District Court for the Eastern District of Texas issued a nationwide injunction that temporarily halted enforcement of the CTA and stayed the January 1, 2025 compliance deadline. In its ruling overturning the nationwide injunction, the Fifth Circuit panel emphasized the government’s strong likelihood of success on appeal, stating that the CTA falls squarely within Congress’s authority under the Commerce Clause.
Compliance Reinstated
With the stay in effect, compliance obligations under the CTA have been reinstated. Reporting companies formed before 2024 must meet their BOI reporting requirements by the January 1, 2025 deadline. Companies formed in 2024 have 90 days from their formation date to file BOI reports. Starting in 2025, newly formed entities will have only 30 days from their date of formation to submit initial BOI reports to FinCEN. Companies that deferred compliance during the injunction period should act promptly to avoid potential retroactive penalties or enforcement actions for noncompliance.
Conclusion
In light of a December 23, 2024, federal Court of Appeals decision, reporting companies, are once again required to file beneficial ownership information with FinCEN. Shortly after the 5th Circuit’s announcement, the U.S. Treasury announced that it recognizes that reporting companies may need additional time to comply given the period when the preliminary injunction had been in effect, we have extended the reporting deadline as follows:
- Reporting companies that were created or registered prior to January 1, 2024 have until January 13, 2025 to file their initial beneficial ownership information reports with FinCEN. (These companies would otherwise have been required to report by January 1, 2025.)
- Reporting companies created or registered in the United States on or after September 4, 2024 that had a filing deadline between December 3, 2024 and December 23, 2024 have until January 13, 2025 to file their initial beneficial ownership information reports with FinCEN.
- Reporting companies created or registered in the United States on or after December 3, 2024 and on or before December 23, 2024 have an additional 21 days from their original filing deadline to file their initial beneficial ownership information reports with FinCEN.
- Reporting companies that qualify for disaster relief may have extended deadlines that fall beyond January 13, 2025. These companies should abide by whichever deadline falls later.
- Reporting companies that are created or registered in the United States on or after January 1, 2025 have 30 days to file their initial beneficial ownership information reports with FinCEN after receiving actual or public notice that their creation or registration is effective.
Failure to submit a BOI report by the extended deadlines would trigger possible civil and criminal penalties for non-compliance with the CTA are daily fines of $500 per day of continued violation, not to exceed $10,000, and possible imprisonment of not more than two (2) years, or both.
We will continue to monitor this case closely and provide updates on any significant developments, including further court rulings or guidance from FinCEN. For more information on the CTA and its compliance requirements, please refer to our prior Client Alert (found here).
The information contained here is not intended to provide legal advice or opinion and should not be acted upon without consulting an attorney. Counsel should not be selected based on advertising materials, and we recommend that you conduct further investigation when seeking legal representation.