On March 2, 2025, the U.S. Treasury Department announced it will no longer enforce the CTA against U.S. citizens and domestic reporting companies, meaning they will not incur penalties or fines under current regulatory deadlines for failing to comply with BOI reporting requirements.

The Treasury also stated that U.S. citizens, domestic reporting companies and their beneficial owners will remain exempt from enforcement once the new rule changes take effect. FinCEN (Financial Crimes Enforcement Network) issued an interim final rule on March 26, 2025, revising the definition of “reporting company” to solely constitute foreign entities registered in a U.S. state.  Thus, as of April 2025, only foreign reporting companies must comply with the CTA.

The reporting requirements of the CTA have been the subject of much dispute and litigation.  A brief history of the CTA and the legal challenges are summarized below in chronological order:

The Corporate Transparency Act (CTA) was enacted on January 1, 2021, as part of the National Defense Authorization Act, to prevent evasion of anti-money laundering rules and other illegal activities. As a result, “reporting companies,” subject to exceptions, are required to report information about their business and its beneficial owners to the Financial Crimes Enforcement Network (FinCEN) division of the Treasury Department.

On December 3, 2024, in the case of Texas Top Cop Shop, Inc., et al. v. Garland, et al., No. 4:24-cv-00478 (E.D. Tex.), the U.S. District Court for the Eastern District of Texas, Sherman Division, issued an order granting a nationwide preliminary injunction blocking enforcement of the CTA.  The Department of Justice, on behalf of the Department of the Treasury, filed a Notice of Appeal on December 5, 2024 and separately sought a stay of the injunction pending that appeal.

On December 23, 2024, a panel of the U.S. Court of Appeals for the Fifth Circuit granted a stay of the district court’s preliminary injunction entered in the case of Texas Top Cop Shop, Inc. v. Garland, pending the outcome of the Department of the Treasury’s ongoing appeal of the district court’s order. FinCEN immediately issued an alert notifying the public of this ruling, and, recognizing that reporting companies may need additional time to comply with beneficial ownership reporting requirements, FinCEN extended reporting deadlines to January 13, 2025.

On December 26, 2024, however, a different panel of the U.S. Court of Appeals for the Fifth Circuit issued an order vacating the Court’s December 23 order granting a stay of the preliminary injunction. Accordingly, as of December 26, 2024, the injunction issued by the district court in Texas Top Cop Shop, Inc. v. Garland is in effect and reporting companies are not currently required to comply with the CTA’s reporting requirements. The Fifth Circuit has indicated that the case will be handled on an expedited basis.

On December 31, 2024, the Justice Department asked the U.S. Supreme Court to issue an emergency order reinstating the CTA as the legal battle plays out in the Fifth Circuit. A decision by the Supreme Court has yet to be made.

On January 23, 2025, the U.S. Supreme Court granted the Justice Department’s December 31 request to lift the nationwide injunction of the CTA. Despite the Supreme Court’s decision, enforcement of the CTA continues to be blocked due to a separate federal district court ruling staying the effective date of the CTA while the lawsuit remains pending in the Fifth Circuit. Samantha Smith and Robert Means v. U.S. Department of the Treasury, No. 6:24-CV-336 (E.D. Texas 1/7/2025). In response to these events, FinCEN has issued an alert stating that CTA filings remain voluntary. 

On February 17, 2025, a federal district court in Texas lifted the nationwide injunction previously issued in the case of Smith et al. v. U.S. Department of the Treasury, et al., thereby removing the primary barrier to CTA enforcement. Consequently, on February 19, 2025, FinCEN issued an alert reinstating the beneficial ownership information (BOI) reporting deadlines, establishing March 21, 2025, as the deadline for most reporting companies. FinCEN also indicated that it may modify reporting rules for certain companies to reduce regulatory burdens and prioritize entities posing “significant national security risks,” though the details of such modifications remain unclear. 

Meanwhile, lawmakers are working to pass the Protect Small Business from Excessive Paperwork Act of 2025 to extend the reporting deadline to January 1, 2026. The bill has received bipartisan support, passing the House with a 408-0 vote, but it still needs to clear the Senate and other procedural hurdles before becoming law. Additionally, on March 25, 2025, just four days after the reporting deadline, oral arguments are scheduled to take place in the Fifth Circuit regarding the constitutionality of the CTA.

While there is considerable legislative and judicial uncertainty surrounding the CTA, reporting companies are preparing to comply with the most recent deadlines to avoid potential criminal and civil penalties.

For a full description of the Corporate Transparency Act and what it entails, please reach out to your BNY Wealth contact.

What is a “reporting company”?

Generally, reporting companies (e.g., corporation, LLC, Limited Partnership) are entities whose formation requires filing a document with the secretary of state or a similar office.

Information required to be reported to FinCEN by “reporting company” 

(1) Full legal name (including any trade name or “doing business as” name)

(2) Business address

(3) Jurisdiction of formation

(4) Taxpayer identification number (TIN), employer identification number (EIN) or a foreign identification number issued by a foreign jurisdiction and the name of that jurisdiction.

Obtaining a “FinCEN Identifier”

Instead of furnishing the above information to the reporting company, a beneficial owner can furnish that information to FinCEN who will issue the beneficial owner a unique number called a “FinCEN Identifier.”  The beneficial owner then furnishes their  “FinCEN Identifier” to the reporting company, who then includes that number on the Beneficial Owner Information (BOI) report it files with FinCEN.  

Critical Information

Trusts must report if they own or control more than 25% of the reporting company or otherwise has “substantial control” over the reporting company. Trustees, grantors and/or beneficiaries may have to report if they are considered: 

• a trustee with the authority to dispose of trust assets, qualifying as a beneficial owner,

• a grantor who has the right to revoke the trust or otherwise withdraw the assets, and 

• a beneficiary who is the sole permissible recipient of income and principal, or has the right to demand a distribution of, or withdraw, substantially all the assets. 

Reporting companies are obligated to update information by reporting any change to their initial filing within 30 days. Example: Change in residential address.

Penalties – Penalties: the civil penalty is up to $591/day. In addition, a violation is subject to a penalty not to exceed $10,000 and/or up to two years in prison. A safe harbor is available for persons who submit incorrect information on a BOI report if the correction is made within 90 days of the original incorrect filing.

Exceptions: A total of 23 different types of entities are exempt from the definition of a reporting company. Exemptions apply mostly to organizations that are already highly regulated. For instance, there is an exemption for “large operating companies,” which have physical presences in the U.S., more than $5 million of gross receipts or sales on the prior year’s tax return, and more than 20 full-time employees.