CTA Filing Deadlines Suspended (For Now)

You perhaps have heard the news that a US District Court in Texas ruled the Corporate Transparency Act unconstitutional and issued a nationwide preliminary injunction against its enforcement. In all, four US District Courts have now ruled on the CTA—two (in Oregon and Virginia) have upheld the Act and two (in Alabama and now Texas) have ruled the Act unconstitutional. Appeals are pending.

On December 9, 2024, FinCEN published an Alert on its BOI webpage, saying it disagrees with this latest ruling, but “While this litigation is ongoing, FinCEN will comply with the order issued by the [District Court in Texas] for as long as it remains in effect. Therefore, reporting companies are not currently required to file their beneficial ownership information with FinCEN and will not be subject to liability if they fail to do so while the preliminary injunction remains in effect.” FinCEN will continue to accept BOI reports filed voluntarily.

For Verrill clients that are subject to the CTA reporting requirements, here is our advice for now:

• If you have already filed BOI reports for your companies, you are in good shape. Unless and until the CTA is ultimately upheld, your obligation to file corrections or updates is suspended. Keep track of those changes, however, and be prepared to file promptly once the dust settles.
• If you have not yet filed BOI reports for your companies but have collected all the necessary information, then you have already done the hard part and could elect to go ahead and make the online filing. (Our clients generally find the filing process to be surprisingly simple once you have your information in hand.) Or you can wait to make the filing if and when the reporting obligations are reinstated.
• If you have not yet filed BOI reports for your companies and have not yet been able to collect all the necessary information, we suggest that you take advantage of the extra time and try to collect any remaining information. Be forewarned, however—some individuals who need to provide personal information to you might drag their feet, citing the Court’s injunction.

Two important points to consider:

1. If the courts do find the CTA (or associated rules) unconstitutional, a vigorous effort likely will be made to cure the problems and reimpose similar filing obligations. Moreover, a few States have already gotten into the business of requiring more detailed ownership disclosures, and failure of the CTA might prompt further initiatives in some States.
2. If the courts ultimately uphold the CTA, the new deadline for existing entities to file their BOI reports will likely be short—perhaps just 30 days from the date FinCEN announces the resumption of BOI reporting obligations. This is why we encourage you to go ahead and collect necessary information. If millions of companies stop working on this and try to gear up within a 30-day window, headaches will ensue.

Those who plan to form a new entity in 2025 should collect necessary BOI information during the formation process. If and when the CTA injunction is lifted, the new entity must promptly file its initial BOI report by whatever new deadline FinCEN establishes for BOI reporting obligations generally (or, if later, by the 30^th day after formation).

Questions? Please contact your Verrill attorney or visit our CTA Resource Center page, which will direct you to articles that discuss the CTA mandates in much greater detail.