Reported by Paul-Kalvin Collins, Japera Parker, and Lorren Patterson of Bailey & Glasser, LLP

The Corporate Transparency Act (CTA) continues to be a source of legal and regulatory uncertainty, with multiple court challenges affecting its enforcement. Initially, a nationwide injunction in Texas Top Cop Shop v. Garland blocked the reporting requirements, but the Supreme Court later lifted this injunction, theoretically reinstating the obligation for companies to file beneficial ownership reports with FinCEN. However, a second case, Smith v. U.S. Department of the Treasury, led to another nationwide injunction, prompting FinCEN to announce that reporting obligations remain on hold despite the Supreme Court’s ruling in the Texas Top Cop Shop case.

In response to this evolving situation, FinCEN issued an alert on January 24, 2025, stating that businesses are not currently required to submit beneficial ownership information due to the Smith injunction. Following an appeal by the Department of Justice seeking to overturn the Smith injunction, FinCEN clarified that if the injunction is stayed, it will extend the reporting deadline by 30 days and consider further regulatory modifications for smaller businesses. As of now, reporting companies are not subject to penalties for failing to report their beneficial ownership, though voluntary submissions remain an option.

Businesses should stay informed and prepare for potential changes in compliance requirements. While no immediate filing is required, entities should assess their reporting status and maintain up-to-date records in case obligations are reinstated quickly. The CTA remains under legal scrutiny in multiple federal courts and could be modified or reimposed at short notice. FinCEN has also indicated that it may adjust deadlines or reporting obligations for lower-risk entities, adding further uncertainty to the process.

Legal proceedings in both Texas Top Cop Shop and Smith continue to shape the future of the CTA. The Fifth Circuit Court of Appeals is set to hear arguments in Texas Top Cop Shop in March 2025, with the potential for Supreme Court review on the CTA’s constitutionality. Meanwhile, the Smith case will proceed separately, and its outcome could either align with or contradict the Fifth Circuit’s ruling in Texas Top Cop Shop, potentially leading to further judicial clarification or intervention. These ongoing cases will determine whether and how the CTA is enforced in the future.

For now, businesses should remain vigilant as legal and regulatory developments unfold. With uncertainties surrounding the court rulings and potential policy changes under the new presidential administration, companies affected by the CTA should prepare for adjustments in compliance obligations. Whether through Supreme Court decisions, congressional action, or FinCEN’s regulatory changes, it is clear that the landscape of beneficial ownership reporting is far from settled.

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