FinCEN Offers Extra Time To File After Court Reinstates Beneficial Ownership Information (BOI) Reporting Requirements

Court Ruling: CTA Reporting Requirements Are Back in Effect

A recent court ruling in the Eastern District of Texas has once again brought the beneficial ownership information (BOI) reporting requirements under the Corporate Transparency Act (CTA) into effect. This development follows a series of legal challenges and temporary injunctions that had previously halted the enforcement of the CTA. On February 5, 2025, the Department of Justice filed an appeal in Smith v. U.S., one of two CTA-related cases making their way through the Texas court system. The government sought to stay a preliminary injunction issued by Judge Jeremy D. Kernodle, which had temporarily blocked the Financial Crimes Enforcement Network (FinCEN) from enforcing the CTA. Judge Kernodle had initially ruled that the CTA and its implementing rules were likely unconstitutional and posed a significant risk of irreparable harm to the plaintiffs.

However, the government pointed to a recent Supreme Court victory in Texas Top Cop Shop, Inc., et al. v. Garland, et al., arguing that the same reasoning should apply in this case. On February 17, Judge Kernodle agreed, staying the injunction and allowing the CTA reporting requirements to go back into effect while the appeal is pending. This ruling means that companies are once again required to comply with the BOI reporting requirements, although they have been granted a short extension to file their reports.

FinCEN’s Response: Extended Deadlines and Exemptions

In response to the court’s ruling, FinCEN has extended the compliance deadline for most companies. The new deadline for filing beneficial ownership information is March 21, 2025, which is 30 days from the date the stay was granted. This extension applies to all reporting companies, except those that were already granted a later deadline due to specific circumstances, such as disaster relief. For example, if a company’s reporting deadline was in April 2025, it should continue to use that later deadline rather than the new March 21 deadline.

However, not all businesses are required to file BOI reports at this time. A ruling in National Small Business United v. Yellen remains in effect for certain plaintiffs, exempting them from the reporting requirements. Specifically, businesses for which Isaac Winkles is the beneficial owner or applicant, as well as members of the National Small Business Association (NSBA), are currently not required to report. This exemption is tied to a ruling by U.S. District Judge Liles C. Burke, who found the CTA unconstitutional. While the government has appealed this ruling to the Eleventh Circuit, a final decision has not yet been made.

More Changes Could Be on the Horizon

The government has hinted that further changes to the CTA’s reporting requirements could be on the way. During the legal proceedings in Smith v. U.S., the government suggested that if the stay were granted, FinCEN would use the 30-day extension period to assess whether modifications to the CTA’s reporting requirements were appropriate. A Treasury official emphasized the agency’s commitment to reducing the regulatory burden on businesses, particularly for lower-risk entities such as small businesses. FinCEN has since confirmed on its website that it will continue to evaluate options for further modifying deadlines or reporting requirements.

These potential changes reflect ongoing concerns about the CTA’s impact on small businesses. Critics argue that the reporting requirements are overly broad and burdensome, particularly for smaller entities with limited resources. The government appears to be taking these concerns into account, signaling that it may prioritize reporting requirements for higher-risk entities while easing the burden on lower-risk businesses.

Other Legal Challenges Are Still Pending

While the Smith v. U.S. ruling has brought the CTA back into effect, other legal challenges to the law are still working their way through the courts. In addition to the National Small Business United v. Yellen case, there are ongoing appeals in the Fourth and Ninth Circuits. These cases, Community Associations Institute, et al. v. Yellen and Firestone et al v. Yellen, also involve challenges to the constitutionality of the CTA. However, unlike the Texas cases, the courts in these instances declined to issue preliminary injunctions on behalf of the plaintiffs. This means that while the legal battles over the CTA are far from over, the current ruling in Texas has cleared the way for enforcement to proceed.

The outcome of these cases could have significant implications for the future of the CTA. If the courts ultimately rule that the law is unconstitutional, it could lead to further delays or even a repeal of the reporting requirements. On the other hand, if the courts uphold the law, it could pave the way for FinCEN to move forward with implementation and enforcement without further interruptions.

Congress Steps Into the Fray

In addition to the legal challenges, Congress has also taken action to address concerns about the CTA. On February 10, the House of Representatives unanimously passed H.R. 736, the Protect Small Business from Excessive Paperwork Act. This bill would postpone the BOI reporting deadline for most companies by one year, pushing the new deadline to January 1, 2026. The legislation, introduced by Rep. Zachary Nunn (R-Iowa), was designed to alleviate the chaos and confusion that have marked the implementation of the CTA.

The bill moved quickly through the House, with only 40 minutes of debate before it was put to a vote. The final vote was 408-0, with 25 members—11 Republicans and 14 Democrats—choosing not to vote. H.R. 736 has now been referred to the Senate Committee on Banking, Housing, and Urban Affairs. While it is unclear when or if the Senate will take action on the bill, its unanimous passage in the House signals bipartisan support for easing the burden on small businesses.

Background on the CTA and Reactions to the Latest Developments

The Corporate Transparency Act was passed in 2021 as part of the National Defense Authorization Act for Fiscal Year 2021. The law requires certain companies to file reports with FinCEN identifying their beneficial owners. The goal of the CTA is to combat illegal activities such as tax fraud, money laundering, and terrorism financing by making it harder for criminals to hide behind shell companies and complex business structures.

The rollout of the CTA has been marked by significant confusion and opposition. Many businesses have expressed concerns about the complexity and cost of compliance, particularly small businesses with limited resources. A recent survey of senior legal and compliance executives found that 83% were concerned about their organization’s compliance with the CTA, and 76% believed the law was causing broader concerns among U.S. businesses.

Reactions to the latest court ruling have been mixed. Advocacy groups such as the FACT Coalition and Transparency International U.S. have cheered the decision, arguing that it is a critical step in the fight against money laundering and other financial crimes. However, the ruling has also been met with skepticism from some in the business community, who argue that the CTA’s reporting requirements are overly burdensome and fail to account for the unique challenges faced by small businesses.

In conclusion, the recent court ruling in Texas has brought the CTA back into effect, but the legal and legislative battles over the law are far from over. As FinCEN works to implement the reporting requirements and Congress considers further delays, businesses will need to stay informed about the latest developments to ensure compliance.