On December 3, 2024, the US District Court for the Eastern District of Texas issued a preliminary nationwide injunction against the Federal government, effectively prohibiting it from enforcing the reporting deadlines for certain entities under the Corporate Transparency Act.
However, just days later on December 23, 2024, the United States Court of Appeals for the Fifth Circuit rendered the prior injunction invalid by issuing a “stay” of the injunction. The court determined that the reasons for the injunction were insufficient to justify its continuation, allowing the provisions of the CTA to move forward as originally intended. The original plaintiffs had not requested such relief, and the district court had not tailored the relief to the penalties before it. Notably, the most recent Congressional spending bill passed to avert a government shutdown had originally included an extension of the filing deadline to December 31, 2025, but this was stripped from the bill before passage.
As a reminder, CTA is a U.S. law enacted in 2021 as part of the National Defense Authorization Act. Its primary purpose is to combat illicit financial activities by increasing transparency in corporate ownership. Under the CTA, most corporations and LLCs are required to disclose their beneficial owners via the Financial Crimes Enforcement Network (FinCEN).
With the injunction lifted, the due dates for compliance with the Corporate Transparency Act remain intact. Businesses are now required to adhere to the established timelines for reporting beneficial ownership information to the Financial Crimes Enforcement Network (FinCEN).
The reporting regime went into effect on January 1, 2024. Entities created before that date have until JANUARY 1, 2025, to file their beneficial ownership in formation report with FinCEN. Any entity created after January 1, 2024, and before January 1, 2025, has a period of 90 days. Any entity created on or after January 1, 2025 is required to submit its initial report within 30 days. These due dates are critical for ensuring that the CTA's provisions are implemented effectively, and non-compliance could lead to significant penalties, and even criminal charges.
ALL PERSONS WHO ARE REQUIRED TO REPORT SHOULD DO SO BY JANUARY 1, 2025
As we navigate this evolving legal landscape, companies must stay informed and up-to-date on compliance obligations.