Articles

Client Alert: CTA Enforcement Suspended – Key Updates on Filing Requirements

Update – Treasury Halts CTA Enforcement and Indicates a Potential Limitation of Scope

By: Mario A. de Castro, Jordan M. Halle, Charles R. McCarthy and Nicole Bemberis*

On March 2, 2025, the U.S. Department of the Treasury (“Treasury”) announced that it will not impose penalties, fines, or pursue enforcement actions against U.S. companies, citizens, or their beneficial owners for failing to file beneficial ownership information (“BOI”) reports, pursuant to the Beneficial Ownership Information Reporting Requirements final rule (31 C.F.R. 1010.380) (the “Reporting Rule”),  and the Corporate Transparency Act (“CTA”) (31 U.S.C. § 5336), even after any forthcoming deadline extensions or changes to the Reporting Rule. Treasury’s announcement follows earlier guidance from the Financial Crimes Enforcement Network FinCEN (the Treasury bureau responsible for enforcing the CTA)—which suspended enforcement of the March 21, 2025, filing deadline.
 
Now, Treasury has taken an even stronger position, stating that it will not enforce any penalties or fines against U.S. citizens, domestic reporting companies, or their beneficial owners, even after a forthcoming rule takes effect. Additionally, Treasury confirmed its intent to propose further rulemaking that would limit CTA reporting requirements to foreign reporting companies only (currently defined as a corporation, limited liability company, or other entity formed under the laws of a foreign country and registered to do business in the U.S. by filing a document with a secretary of state or similar office under the laws of a U.S. state, including any U.S. territory, or Indian Tribe).
 
Conflicting Announcements and a Word of Caution When Making Contractual Representations
 
Treasury’s March 2 announcement appears in tension with FinCEN’s February 27 announcement indicating that it would not take any enforcement action until new rulemaking became effective, raising questions and uncertainty for many businesses (as of the time of this alert,[1] FinCEN’s website still announces the March 21, 2025, deadline “for most companies”).
 
More importantly, Treasury’s latest announcement that it will not enforce the CTA does not mean that this federal statute has been amended or repealed. Further, none of the previously reported lawsuits have resulted in nationwide bans. This means that, even if the CTA is not enforced by FinCEN, the law is still “on the books” and could, presumably, be a factor in other enforcement actions.
 
Additionally, businesses that have not submitted BOI reports should exercise caution when providing contractual representations that they have “complied with all applicable laws”. The underlying reason is that such representations could be viewed as a default giving rise to breach of contract claims.
 
Given the uncertainty, the above-mentioned issues, and frequently changing positions, beneficial owners of U.S.  (and foreign) companies that have yet to file their respective BOI reports should consult with counsel and determine whether to proceed to file BOI reports or not, considering these no enforcement pronouncements until further guidance is issued by FinCEN/Treasury. However, in making a decision to comply or not with the CTA BOI report filing requirements, beneficial owners and their management teams that have as of the date of this latest guidance taken material steps to complete their BOI reports should as a practical matter proceed to file their BOI reports, if doing so will not create any additional administrative burdens or compliance costs to their companies.
 
Treasury’s Recent Announcement & Potential Legal Challenge
 
Under the proposed rule, domestic companies (entities formed in the U.S. or its territories) would no longer be required to file under the CTA. However, foreign reporting companies (entities formed under the laws of a foreign country that have registered to do business in the U.S.) would still be required to file. Notably, U.S. subsidiaries of foreign companies would be classified as domestic reporting companies and therefore be exempt from reporting requirements.
 
While Treasury’s rollback of CTA enforcement may face legal challenges, it remains unclear who, if anyone, would challenge the new proposed rules. Additionally, Congress is considering legislative changes to further amend the CTA.
 
Next Steps & Key Takeaways
 
FinCEN is expected to issue an interim final rule by March 21, 2025, which will likely extend BOI reporting deadlines and formally revise CTA requirements. As part of this process, public comments will be solicited later in 2025 through a notice of proposed rulemaking, aimed at balancing regulatory burdens on small businesses with the CTA’s national security and anti-money laundering objectives. While the proposed rule may eliminate reporting requirements for domestic companies, foreign reporting companies would presumably still be required to comply.
 
Treasury has suspended CTA enforcement, meaning no penalties or fines will be imposed on U.S. companies or citizens for failing to file ownership reports. The proposed rule aims to limit CTA reporting to foreign reporting companies only, effectively excluding domestic companies from compliance obligations. However, the future of the CTA remains uncertain, as legal challenges and potential congressional action could further shape compliance requirements.

*Senior Law Clerk

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