Enforcement of the Corporate Transparency Act: To Be or Not To Be?

Today is the day! March 21, 2025, serves as the deadline for most businesses to report their beneficial ownership information (“BOI”) under the Corporate Transparency Act (“CTA”). But not so fast! While the prior statement is technically accurate, the situation has been complicated by statements and assurances from the U.S. Department of Treasury and the Financial Crimes Enforcement Network (“FinCEN”). Here’s why.

March 21 Deadline
Over the past few months, we have closely followed and analyzed the ongoing developments surrounding the CTA in our blog posts. This ever-evolving saga has included nationwide injunctions and stays—both imposed and lifted—as well as multiple extensions of the BOI reporting deadline. You can review our previous posts here:

• Corporate Transparency Act reporting deadline remains January 1, 2025
• Federal court puts Corporate Transparency Act ownership reporting on hold
• Federal Appeals Court Reinstates Corporate Transparency Act Reporting Requirements
• Corporate Transparency Act Reporting Requirements Suspended Once Again . . . For Now
• SCOTUS to Decide Fate of Nationwide Injunction Against Corporate Transparency Act
• SCOTUS Allows Corporate Transparency Act Reporting Requirements to Resume
• Corporate Transparency Act Whiplash: Reporting Requirements Still on Hold
• BOI is Back!

In short, after navigating multiple legal challenges, the original BOI reporting deadline for most businesses of January 1, 2025, was extended to March 21, 2025. However, despite this official deadline, statements and assurances from FinCEN and the U.S. Department of Treasury have added further complexity to the situation.

Promises made, promises kept?
On February 27, FinCEN announced that it would not impose fines, penalties, or any other enforcement actions against companies that fail to file or update their BOI reports by the March 21 deadline. FinCEN clarified that this “non-enforcement action” will remain in effect until a forthcoming final rule takes effect. As of this publication, FinCEN has yet to release the proposed final rule that is expected to provide further guidance and clarity on the CTA’s reporting requirements.

But the assurances didn’t stop there. On March 2, the U.S. Department of Treasury announced that the “non-enforcement action” would continue for all domestic reporting companies and beneficial owners even after FinCEN’s forthcoming rule is issued and takes effect. In essence, the Treasury has committed to not enforcing the CTA against domestic companies and owners required to file BOI reports under the Act. However, this relief will not extend to foreign reporting companies, which will be required to comply with the CTA’s reporting requirements. Additionally, the Treasury has pledged to propose a rule that would formally limit the CTA’s scope to foreign reporting companies only.

It’s important to recognize that, until these proposed rules are officially enacted, the promises made remain just that—promises. As of now, no formal rule or regulation prevents the enforcement of the CTA against domestic companies and owners. Until these assurances are solidified into law, businesses should consult with their legal counsel to determine the best course of action regarding CTA compliance. 

Additionally, there has been considerable discussion suggesting that these promises and proposed rules effectively eliminate the CTA for domestic companies and owners. However, that is not entirely accurate. If implemented, these proposed rules would be administrative in nature and remain in effect only as long as the current administration permits. As with any administration change, a future administration could introduce new rules that reinstate all aspects of the CTA, including reporting requirements for domestic companies and owners. 

For some "light" reading, feel free to check out our blog post on the Principles of Government, where we discuss federal agencies and the powers granted to them. 

On the horizon.

Legal Challenges of CTA. The CTA continues to face several legal challenges nationwide questioning its constitutionality. Two of the most notable cases, which introduced the nationwide injunction and stay, are the Texas Top Cop Shop case and the Smith case, both currently before the federal district court in Texas. These cases challenge the constitutionality of the CTA, and the court's ruling could have significant implications for the future of the law. The situation is further complicated by a division among courts across the country regarding the CTA’s constitutionality. While some courts have upheld the CTA as constitutional, others have found it likely unconstitutional and issued more limited injunctions against its enforcement. In summary, the outcome remains uncertain. It appears that this issue is ultimately headed to the Supreme Court of the United States for final determination. 

Legislation. There are several legislative proposals that could impact the CTA. One such proposal, the Protect Small Businesses from Excessive Paperwork Act of 2025, aims to extend the BOI filing deadline for most businesses to January 1, 2026. The bill has already passed the House of Representatives and is now in the Senate, where it has been referred to the Committee on Banking, Housing, and Urban Affairs. Additionally, there are bills in both the House and Senate seeking to repeal the CTA entirely. H.R. 425 and S.100, both titled the Repealing Big Brother Overreach Act, aim to fully overturn the CTA, though they have not seen significant progress since their introduction.

Legal Challenges of Promises Made. To further complicate matters, the Treasury Department’s current stance on suspending enforcement of the CTA against domestic reporting companies and owners may face its own set of legal challenges. Given the significance of the CTA, it is likely that the "non-enforcement action" will undergo intense scrutiny, litigation, and could potentially lead to legislative action. Should this occur, it raises the possibility that the CTA could remain fully enforceable, with reporting requirements for domestic companies and owners intact. This ongoing uncertainty underscores the need for businesses to stay informed and proactive about potential changes and developments.

What Should Businesses Do Now? 
With enforcement actions in limbo, businesses should: 

1. Stay informed. Due to the ongoing legal challenges, proposed legislation, and potential future legal disputes, businesses should stay up-to-date on the status of the CTA and its enforcement. The situation appears to be evolving almost daily.
2. Counsel. Businesses should consult with their legal counsel to determine the best course of action regarding the CTA. Taking a risk-averse approach may provide peace of mind, while a wait-and-see strategy could lead to unforeseen consequences.

Conclusion
At this moment, it appears that no fines or penalties will be imposed on businesses that fail to meet the March 21 deadline for BOI reporting. However, given the unpredictable nature of BOI and the CTA, things can change quickly. The CTA has been a dramatic journey, filled with unexpected twists, cliffhangers, and surprising developments. However, the story is far from over. We will continue to keep you updated on the latest changes and progress of the CTA until we reach a final resolution.