Once again, there is a new update related to the status of the Corporate Transparency Act (CTA).

Photo by Scott Graham on Unsplash

New Update and Deadline

On Monday, February 17, 2025, the United States District Court for the Eastern District of Texas lifted the nationwide injunction in Smith v. U.S. Department of the Treasury that prevented the beneficial ownership requirements of the Corporate Transparency Act from going into effect. This was the final nationwide injunction in place pausing the reporting requirements.  In light of this ruling, the United States Department of Treasury Financial Crimes Enforcement Network (FinCEN) initially announced March 21, 2025 as the new deadline for the vast majority of reporting entities to file an initial, updated, or corrected report.

However, that is not the end of the story.  On February 27, 2025, FinCEN issued a press release announcing that it will not issue any fines, penalties, or take any other enforcement actions based on failure to file or update beneficial ownership information.  FinCEN will issue an interim final rule no later than March 21, 2025 that will extend reporting deadlines and provide “new guidance and clarity” on the reporting process.  [Read press release here.]

On March 2, 2025, the United States Department of the Treasury announced that the new rulemaking will limit the applicability of beneficial ownership reporting only to foreign entities.  [Read press release here.]

Basic CTA Information

In January 2024, we began alerting people to the CTA, a new federal law that would require most entities that are created by filings with the Secretary of State (like an LLC, LP, LLP, corporation) to file a beneficial ownership report with FinCEN.

Who?

The reporting requirements apply to most small entities.  This includes LLCs, corporations, and any entities created by filing a document with the Secretary of State or other similar agency. This does include single member LLCs.  For many states, that includes limited partnerships, limited liability partnerships, and limited liability limited partnerships. Depending on state rules, this may also include certain business trusts.  General partnerships and sole proprietorships are not required to report as there is no filing requirement for these entities.

There are a long list of entities that are exempt from reporting including publicly traded companies, certain tax-exempt entities, certain banks, certain insurance companies, and others.  To read more on the exemptions, click here. Importantly, most farm and ranch entities will likely not fall under the listed exceptions.

What?

There are essentially three categories of information that must be provided:  entity information; beneficial owner information; and company applicant information.

Category 1:  Entity information

Each entity must report the following information:

• Full legal name of company
• Trade names or DBAs
• Complete address including street address of principal place of business
• State, Tribal Nation, or foreign jurisdiction of creation
• Company identification number (Taxpayer Identification or Employee Identification Number)

Category 2:  Beneficial owner information

Each entity must also report the following information for each beneficial owner. A “beneficial owner” is a person who, directly or indirectly, exercises substantial control over the company or who, directly or indirectly, owns 25% or more of the ownership interest in the company.  An individual with substantial control is one who directs, determines, or exercise substantial influence over important decisions of a reporting company and includes senior officers, general counsel, individuals with authority to appoint or remove senior officers or a majority of the board of directors, individuals who directs or determines or has substantial influence over important decisions of the business. Beneficial owners are required to provide the following information:

• Full legal name
• Date of birth
• Residential address
• Identification number and image of either US Passport or Driver’s License

Category  3:  Company applicants

For all companies created after January 1, 2024, the “company applicants” must also be reported.  Company applicants include the individual who directly files the document that created or registers the reporting company and the individual primarily responsible for directing or controlling the filing of the relevant document.  This is particularly important for attorneys to flag as, oftentimes, company applicants may be the entity’s attorney.

Company applicants must provide the following information:

• Full legal name
• Date of birth
• Residential address
• Identification number and image of either US Passport or Driver’s License

How?

FinCEN created an online portal for entities to file their BOIR.

Failure to comply?

The Corporate Transparency Act includes penalties for both entities and individuals for willful violations of the reporting requirements.  Penalties may be imposed for willfully filing false information and for willfully failing to report. Penalties may include civil fines of up to $500/day for each day the violation continues and criminal penalties of up to $10,000 and possible imprisonment for up to 2 years.  However, as noted above, as of February 27, 2025, FinCEN has announced it will not issue any fines, penalties, or take any other enforcement actions based on failure to file or update beneficial ownership information.

Potential Congressional Action?

There are a couple of bills in the United States Congress that could change the CTA reporting status.

First, there are bills that would extend the filing deadline for beneficial ownership reporting until January 1, 2026.  HR 736 unanimously passed the House and is pending before the Senate.  There is a companion bill in the Senate as well, S. 505.

Second, there are companion bills that would completely repeal the CTA, thereby cancelling all reporting requirements.  These are HR 125 and S. 100. Both have been introduced and are in their respective committees.

Key Takeaways

At this point, although both nationwide injunctions have been lifted and the CTA is currently in effect, FinCEN will not be issuing fines, penalties, or taking any other enforcement actions for failure to report beneficial ownership information.  Before March 21, 2025, FinCEN will issue an interim final rule offering more clarity and guidance.

Finally, as we have seen clearly over the past few months, this continues to be a developing and frequently changing issue. The most up to date information on current reporting requirements may always be found on the FinCEN website.