Corporate Transparency Act Enforcement Stalled: What It Means for Businesses

Updated December 24, 2024: The U.S. government secured a motion to stay the federal district court decision that had temporarily paused the Corporate Transparency Act (CTA) filing requirements. In response, the Department of the Treasury has acknowledged that reporting companies may require additional time to comply, given the period during which the preliminary injunction was in effect. To address this, the reporting deadlines have been adjusted as follows:

1. For reporting companies created or registered before January 1, 2024:
   These companies must file their initial beneficial ownership information reports with FinCEN by January 13, 2025. (This represents an extension from the original January 1, 2025 deadline.)

2. For reporting companies created or registered in the U.S. between September 4, 2024, and December 2, 2024:
   Companies with filing deadlines between December 3, 2024, and December 23, 2024, now have until January 13, 2025, to submit their reports to FinCEN.

3. For reporting companies created or registered between December 3, 2024, and December 23, 2024:
   These companies have an additional 21 days beyond their original filing deadline to submit their initial reports.

4. For reporting companies qualifying for disaster relief:
   Filing deadlines may extend beyond January 13, 2025, based on specific disaster relief provisions. Companies should adhere to the later applicable deadline.

5. For reporting companies created or registered in the U.S. on or after January 1, 2025:
   These companies must file their initial beneficial ownership information reports with FinCEN within 30 days of receiving actual or public notice of their creation or registration.

In light of these reinstated requirements, Redpath and Company strongly advises organizations subject to the CTA to ensure all necessary documentation is prepared for timely filing. We remain committed to monitoring developments and providing timely updates to help businesses stay compliant with the CTA requirements.

Enforcement of the Corporate Transparency Act (CTA) has hit a significant roadblock. The U.S. District Court for the Eastern District of Texas recently issued a preliminary injunction that halts the Department of Justice from enforcing the CTA.

Originally enacted in 2021, the CTA required businesses and certain legal entities to report beneficial ownership and managerial details to the Financial Crimes Enforcement Network (FinCEN). 

Plaintiffs in the case, led by the National Federation of Independent Business (NFIB), argued that compelling companies to report beneficial ownership details violates their Fourth and Fifth Amendment rights and oversteps the federal government’s powers.

This delay could have profound implications for small and medium-sized businesses across the country:

• Compliance is on hold, for now: For the moment, small business owners are not required to comply with the reporting obligations outlined in the CTA. This means there’s no immediate need to submit complex ownership disclosures to FinCEN.
• Potential short-term cost savings: The delay may also alleviate potential financial burdens associated with compliance. Postponing these costs allows businesses to focus on recovery and growth.
• Uncertainty remains: While the injunction provides temporary relief, it also leaves questions hanging in the air. The incoming Trump administration may seek to further limitations or restrictions for the CTA, or simply try to repeal or amend it.

Stay Vigilant

While enforcement of the CTA is on hold, it’s critical for businesses to be proactive rather than complacent. Here’s what you can do to stay prepared in case the legal landscape shifts again: 

• Stay updated: Watch for further updates related to the CTA, especially rulings from the Eastern District of Texas or higher courts.
• Assess your current ownership structure: If you haven’t recently reviewed your ownership plans, now is the time. If enforcement does resume, you’ll need to identify key individuals and entities that might need to be disclosed.
• Engage financial advisors: Redpath advisors can work with you to determine how potential compliance costs might impact your business. Proactive financial planning can help you prepare for any further changes. 

The preliminary injunction blocking the Corporate Transparency Act is a significant victory for small businesses—but it’s not the final chapter. Whether this law will be permanently struck down, amended, or eventually enforced remains uncertain. 

For businesses looking ahead, the takeaways here are clear: Preparation, adaptability, and expert consultation from Redpath will be your greatest assets in the face of evolving compliance requirements.