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On Feb. 18, 2025, a federal court reinstated the Corporate Transparency Act (CTA) reporting requirements, and the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) extended the CTA reporting deadline for most entities. However, on Feb. 27, 2025, FinCEN announced that it would pause the enforcement of the CTA reporting requirements and would issue an interim final rule in the coming weeks. On March 2, 2025, the Department of the Treasury issued an additional announcement that it would not enforce penalties under the CTA.
Background of the CTA
The CTA was enacted in 2021 as part of the Anti-Money Laundering Act of 2020 to combat illicit financial activity, such as money laundering, tax fraud and financing of terrorism. The CTA requires certain business entities, or CTA “reporting companies” (including certain corporations, limited liability companies and certain other entities created or, with respect to non-U.S. entities, registered to do business in a U.S. state or tribal jurisdiction) to report information about the company and its beneficial owners (BOI) to FinCEN.
Under the CTA, reporting companies created or registered before Jan. 1, 2024, were required to file their initial BOI reports by Jan. 1, 2025; reporting companies formed in 2024 were required to file within 90 days; and reporting companies formed in 2025 and beyond were required to file within 30 days of formation. FinCEN began accepting BOI reports on Jan. 1, 2024.
CTA Court Rulings
On Jan. 7, 2025, in Smith v. U.S. Department of the Treasury, the U.S. District Court for the Eastern District of Texas issued a nationwide preliminary injunction, temporarily blocking the CTA’s reporting obligations. However, on Feb. 18, 2025, the Texas court stayed the injunction and effectively reinstated the CTA reporting requirements for reporting companies nationwide. In response to this court decision, FinCEN extended the initial reporting deadline for most entities to March 21, 2025. The Smith ruling also reflects the status of similar ongoing litigation in which another CTA preliminary injunction was recently lifted.
CTA Enforcement Paused
Although the Texas court ruling reinstates the CTA reporting requirements, FinCEN announced that it would not issue any fines or penalties or take any other enforcement actions against companies that fail to file BOI reports by the current deadlines. FinCEN also stated that it would issue interim guidance no later than March 21, 2025.
Further, the Department of the Treasury announced it would not enforce any penalties or fines associated with the BOI reporting rule under existing regulatory deadlines and will not enforce any penalties or fines against U.S. citizens or domestic reporting companies after the forthcoming rule changes take effect. Additionally, the Department of the Treasury stated that it will be issuing a proposed rule to narrow the scope of the CTA to foreign reporting companies only.
Employer Takeaways
While the CTA reporting requirements are not currently enforced, the CTA and its implementing regulations remain in effect and FinCEN is still accepting BOI reports. Therefore, reporting companies may still choose to file BOI reports before additional guidance is issued. Employers may also monitor for interim rules from FinCEN to be issued by March 21, 2025. However, the Department of the Treasury has indicated that it will not enforce any reporting requirements for U.S. citizens or domestic reporting companies under such future rules and that it plans to issue a new rule to narrow the CTA’s scope. Therefore, employers should anticipate significant uncertainty and monitor for updates from the government and pursuant to ongoing legal challenges.
© 2025 Zywave, Inc.
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