On February 27, FinCEN announced it would not impose penalties or take other enforcement measures based on companies’ failure to file or update their beneficial ownership information reports. It also intends to release an interim rule by March 21, further extending the beneficial ownership information (“BOI”) reporting deadlines. Additionally, it forecasted a new notice of proposed rulemaking and opportunity for comment later this year, indicating that FinCEN may revisit the Corporate Transparency Act (“CTA”) rules altogether.
If your head is spinning with the various rules, proposals, injunctions, and other events on the CTA’s road to regulatory implementation, you are not alone. The CTA’s whirlwind drama has all the highs, lows, and surprise twists of any Hollywood thriller.
The CTA was originally passed through a harrowing veto override on January 1, 2021. It requires FinCEN to issue implementing regulations; FinCEN proposed to issue three rules for this purpose, the first being the Reporting Rule requiring that certain entities report their BOI to FinCEN. The Reporting Rule as originally finalized would have required covered entities to report their BOI to FinCEN by January 1, 2025.
Lawsuits quickly emerged to challenge the Reporting Rule, and, in a few cases, injunctions were issued limiting enforcement of the Rule. In December 2024, a nationwide preliminary injunction was issued in Texas Top Cop Shop v. Garland prohibiting enforcement of the Rule pending the outcome of the case. In a surprise twist, however, that injunction was stayed by the Supreme Court in January 2025. Justice Gorsuch’s concurrence in the Texas Top Cop Shop decision added to the suspense by suggesting that the Court may be open to directly considering whether a district court may issue this type of nationwide injunction. Although a separate legal issue, a decision in that regard could have potentially broad ramifications in the American legal system.
Although the Top Cop Shop injunction ended, the story wasn’t over yet. Also in January 2025, a separate stay was ordered in another case (from the same district as Top Cop), Smith v. U.S. Dept. of Treasury. That injunction was stayed on February 18, however, following the Top Cop Shop decision, thereby allowing CTA enforcement to proceed as to all covered entities – except, of course, the plaintiffs in yet another case, National Small Business United v. Yellen, pending in the Eleventh Circuit.
It was against this backdrop that FinCEN, not to be left out of the action, announced on February 19 that March 21 would be the new reporting deadline for companies not subject to a later deadline (or protected by the stay in the Eleventh Circuit case). The February 27 announcement that FinCEN will, by March 21, issue a new interim rule further delaying filing deadlines would therefore seem to supersede that February 19 announcement, meaning that reporting will not be required until some time after March 21.
In the meantime, a Maine court has ruled that the CTA is constitutional and district courts in two other circuits have concluded that the CTA is likely constitutional and denied preliminary injunctions. It is therefore quite likely that a circuit split could emerge, increasing the chances that this will be ultimately decided in a final showdown at the Supreme Court – unless, of course, legislative efforts now being made to repeal or amend the CTA present a final surprise twist before the legal battle resolves. Stay tuned as this drama unfolds!
As always, the Compliance Hub Hotline is available to assist with any regulatory thrillers that may come your way.