As we have mentioned in a series of previous client alerts, there have been a number of legal challenges to the constitutionality of the CTA and, in particular, the requirement that the “beneficial owners” of a wide variety of legal entities, including corporations and LLCs, provide their identity and copies of identifying documents to the federal government by filing and regularly updating beneficial ownership information reports (the “Reporting Rule”). What is the purpose of the CTA? Read our guide here.
While a number of the legal challenges to the CTA have been successful, the most significant ruling occurred on December 3, 2024, when the U.S. District Court for the Eastern District of Texas issued an order imposing a nationwide injunction against enforcement of the CTA and the Reporting Rule. While the Supreme Court subsequently lifted this injunction on January 23, 2025, an additional ruling on January 7, 2025 imposed a separate injunction not affected by the Supreme Court ruling. The January 7 injunction still remains in effect, pending appeals.
The Financial Crimes Enforcement Network (FinCEN), a bureau of the United States Treasury Department which is tasked with combatting financial crimes and administers the CTA, has stated that if the January 7 injunction is stayed, allowing FinCEN’s Reporting Rule to come back into effect, it intends to extend the reporting deadline for all reporting companies 30 days from the date the stay is granted.
In summary, the CTA is still on hold and there should be at least 30 days to comply if all of the injunctions are lifted. As legal challenges to the CTA continue to move through the courts, enforceability of the Reporting Rule could potentially be reinstated at any time.
So, what should you or your business do to avoid penalties associated with non-compliance? Reporting companies could file now if they have not already done so (FinCEN is still accepting voluntary submissions), or if not, they should at least be in a position to move quickly if the Reporting Rule is reinstated.
Contact Us
Our attorneys will continue to monitor developments regarding the CTA and provide additional information as necessary. For more information about the CTA and its potential impact on you or your business, please contact us at cta@darslaw.com.
