The Treasury Department is still pushing for eventual enforcement of the Corporate Transparency Act’s (CTA) beneficial ownership information reporting provisions — filing a notice of appeal Wednesday in a case that is currently preventing the filing requirement from going into effect.
A circuitous path.
The CTA, intended to combat money laundering and other crimes by requiring certain entities to file information about their beneficial owners, has faced a host of challenges — resulting in an indefinite delay in the January 1, 2025, reporting deadline.
Last month, the U.S. Supreme Court stayed one Texas federal district court’s preliminary ruling barring enforcement of the CTA nationwide. (McHenry v. Texas Top Cop Shop, 135 AFTR 2d ¶ 2025-353, SC, 1/23/2025).
However, with a second Texas federal district court univerally barring implementation of the CTA’s beneficial ownership information rule remaining in effect, small businesses and other reporting entities were still not obligated to file (Smith v. U.S. Department of the Treasury, 135 AFTR 2d 2025-370, DC TX, 1/7/2025).
The Texas cases were two of several cases filed seeking to invalidate the CTA and its reporting rule. The 11th U.S. Circuit Court of Appeals is also considering whether to overturn a decision against the government in National Small Business United v. Treasury (No. 24-10736). Meanwhile, district courts within the 4th and 9th Circuits have upheld the reporting requirements.
Government appeal.
With the change in administration, the fate of these many pending cases was initially unclear. However, on February 5, the government filed a notice of appeal Smith, seeking to undo the district court’s pause of the beneficial ownership filing requirements.
In an accompanying motion submitted by Acting U.S. Attorney Abe M. McGlothin Jr. and Assistant Attorney U.S. Attorney James Gillingham, the government requests a stay of the Smith court’s injunction in its entirety, or at a minimum, a stay as to all but the named plaintiffs in the case.
FinCEN’s plan.
The motion also sets forth Treasury’s next steps should the stay be granted. The Financial Crimes Enforcement Network (FinCEN) — the arm of Treasury tasked with enforcing the CTA — “intends to announce that it will extend the compliance deadline for thirty days” should the stay be granted.
In addition, FinCEN plans to consider options “to prioritize reporting for those entities that pose the most significant national security risks while providing relief to lower-risk entities.” This may include amending the final beneficial ownership information reporting rule, according to the motion.
FinCEN also shared the plan in a web alert.
Reactions.
Melissa Wiley, a partner at Kostelanetz LLP, said she “did not see this one coming.” She told Checkpoint she “was expecting the DOJ to let the Smith injunction play out for as long as possible,” but “it now appears that DOJ will continue to defend the law’s constitutionality.”
The Trump administration’s decision to continue to defend the CTA didn’t come as a complete surprise to everyone. Transparency International’s Scott Greytak noted that “the Trump White House tasked the new Treasury Secretary with evaluating beneficial ownership thresholds to ensure that U.S. sanctions deny Iran all possible illicit revenue” in a memorandum issued earlier this week.
“The beneficial ownership registry created by the Corporate Transparency Act is obviously a key part of that work,” explained Greytak. “We welcome the Trump Administration’s ongoing defense of the CTA in this and other court cases,” he added.
Wiley called the proposed 30-day extension “fairly reasonable, particularly in light of the fact that FinCEN has made clear in the past that it’s not going to penalize someone who did not file because they did not know they had a filing obligation.”
The American Institute of CPAs’ (AICPA) Melanie Lauridsen, disagreed. “While we appreciate FinCEN’s intention to provide a 30-day filing extension for the BOI reporting if the injunction is lifted, we believe that 30 days is simply not enough,” Lauridsen told Checkpoint.
Lauridsen said the short timeframe “will compound the burden on millions of businesses who must also comply with the March 15th and April 15th filing deadlines.” AICPA is pushing FinCEN to provide a longer extension should the injunction be lifted.
One more thing to watch — “Republicans likely have the votes in Congress to repeal the [CTA],” according to Wiley. “Stay tuned for what the legislative branch decides to do.” (More on recent legislative efforts here.)
For more on the CTA’s beneficial ownership information reporting requirements, see Checkpoint’s Federal Tax Coordinator ¶ S-3650.0.
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