Corporate Transparency Act Enforcement Faces Legal Challenges: Compliance Deadlines in Flux; No Current Mandatory Reporting Obligation Currently in Place
Published: January 6, 2025
The Fifth Circuit ordered that a nationwide injunction be restored against enforcement of mandatory reporting obligations under the Corporate Transparency Act (CTA) on December 26, 2024. This means that any beneficial interest reporting by entities at this point is voluntary.
The CTA is a landmark law requiring businesses to disclose beneficial ownership information to the Financial Crimes Enforcement Network (FinCEN). The CTA is facing escalating legal challenges that have thrown its enforcement timeline into turmoil.
Initially, the U.S. District Court for the Eastern District of Texas issued a nationwide injunction on December 3, 2024, halting enforcement of the CTA. The government appealed, and on December 23, 2024, a motions panel of the Fifth Circuit Court of Appeals temporarily stayed the district court’s injunction, citing the strong likelihood that the CTA is constitutional under Congress’s Commerce Clause authority. The appellate court’s stay also emphasized the irreparable harm to national security and anti-money laundering efforts if the CTA’s enforcement were delayed.
However, the legal landscape shifted again on December 26, 2024, when the Fifth Circuit’s merits panel reversed the stay. The panel emphasized the importance of preserving the constitutional status quo while it considers the parties’ substantive arguments, vacating the motions panel’s earlier order granting the government’s motion to stay the district court’s preliminary injunction enjoining enforcement of the CTA and the Reporting Rule.
In response to the Fifth Circuit’s reversal, the government filed an emergency application with the U.S. Supreme Court on December 31, 2024, seeking to reinstate the stay and allow the CTA to proceed. The government argues that the CTA is a vital tool for combating financial crimes and terrorism financing, and that the compliance requirements are narrowly tailored and minimally burdensome for most businesses.
This ongoing litigation has heightened uncertainty for businesses subject to the CTA. FinCEN’s initial compliance deadline of January 1, 2025, had been extended to January 13, 2025, following the earlier stay. With the Fifth Circuit’s reinstatement of the injunction, these deadlines are now suspended indefinitely pending further judicial review. Businesses are advised to prepare their beneficial ownership information while monitoring legal developments closely.
For additional updates and official guidance, visit FinCEN’s website at fincen.gov/boi.