If you feel punch-drunk from the rapid-fire updates to the Corporate Transparency Act (“CTA”), you are not alone. It is hard to keep up with the madness surrounding this law.
Hoping not to stupefy readers, I will address what I believe is the latest major development in the life of the CTA. The Treasury made an earth-shattering announcement this past Sunday that can be broken down into the following two bite-size components:
On Thursday, February 27, 2025, FinCEN announced that it will not issue any penalties or pursue enforcement action against reporting companies for the mere failure to meet the current filing deadlines. That news for many is like the title to British songwriter and singer Zoë’s hit song Sunshine on a Rainy Day!
Be aware, this reprieve only lasts until FinCEN issues its interim final rules and they become effective. These rules are expected to be issued on or before March 21, 2025. Consequently, for those reporting companies that have not registered yet, they need to keep a keen eye on the ball. Alternatively, those companies may want to consider filing before the extended deadline to avoid a foot fault.
I was hoping that I could report to my readers that the turbulent and lengthy ride of the Corporate Transparency Act (“CTA”) was, one way or another, finally over! Unfortunately, I am unable to deliver that news today. Instead, I am briefly reporting on the most recent development in the crazy saga.
From previous reporting, you may recall that, on January 23, 2025, the U.S. Supreme Court, in Texas Top Cop Shop, Inc. et al v. Merrick Garland, Attorney General of the United States et al., lifted the Fifth Circuit’s injunction, that was preventing the government from enforcing the CTA. However, as also reported, the SCOTUS decision had no practical impact on the government’s ability to enforce the CTA because another court (the Eastern District of Texas) in a different case (Smith et. al. v. U.S. Department of Treasury et. al.) had issued (on January 7, 2025) a nationwide injunction against the government’s enforcement of the CTA. Accordingly, that court’s injunction, despite the high court’s decision in Texas Top Cop Shot, Inc., remained in place.
As I reported yesterday, the U.S. Supreme Court, in Texas Top Cop Shop, Inc. et al v. Merrick Garland, Attorney General of the United States et al., lifted the Fifth Circuit’s injunction, that had been preventing the government from enforcing the Corporate Transparency Act (“CTA”). However, as reported by Mengqi Sun of The Wall Street Journal, there is another Texas court (the Eastern District of Texas) where the judge issued a nationwide injunction against the government’s enforcement of the CTA and that the injunction remains in place. The Wall Street Journal further reported that there has been no appeal of that decision to a higher court.
I last reported on December 27, 2024, that the Corporate Transparency Act (“CTA”) hit yet another speed bump. The U.S. Court of Appeals for the Fifth Circuit (“Fifth Circuit”) put the CTA on ice as of December 24, 2024, restraining the government from enforcing the new law while it heard the underlying matter in Texas Top Cop Shop, Inc. et al v. Merrick Garland, Attorney General of the United States et al.
On December 31, 2024, the government petitioned the U.S. Supreme Court (“Supreme Court”), asking it to remove the stay, allowing the government to enforce the CTA pending the outcome of the Fifth Circuit case and the Supreme Court’s decision should it accept a writ of certiorari and ultimately rule on the constitutionality of the CTA.
INTRODUCTION
On December 6, 2024, I reported that the U.S. District Court for the Eastern District of Texas, in Texas Top Cop Shop, Inc. et al v. Merrick Garland, Attorney General of the United States et al, issued a 79-page decision, including a preliminary injunction, creating a nationwide prohibition against the government enforcing the Corporate Transparency Act (“CTA”).
As suspected, the government immediately filed an emergency appeal, asking the United States Court of Appeals for the Fifth Circuit (“Fifth Circuit”) to stay the injunction and to hear its arguments in favor of overturning the Texas court’s decision.
I have yet again encountered another important development diverting me from my multi-part blog series on Subchapter S. Earlier this week, the Corporate Transparency Act (“CTA”) hit a massive obstacle. I feel compelled to report about it.
On December 3, 2024, the U.S. District Court for the Eastern District of Texas, in Texas Top Cop Shop, Inc. et al v. Merrick Garland, Attorney General of the United States et al, issued a 79-page decision, including a preliminary injunction, creating a nationwide prohibition against government enforcement of the CTA.
This decision has created a tsunami of banter among members of the legal profession, the media and the business community. While the decision appears to have delivered an early holiday cheer to many, caution is advised. As my late tax professor, James J. Freeland, would have advised his students after reading the decision, pause for cause!
As you may be aware, the Corporate Transparency Act (the “CTA”) is a new federal law that requires most U.S.-based companies, including corporations, partnerships and limited liability companies, to report information regarding their “beneficial owners” to the federal government through the Financial Crimes Enforcement Network (“FinCEN”) and a new FinCEN IT system known as the Beneficial Ownership Secure System (“BOSS”). The intent of the CTA and the reporting to FinCEN is to combat money laundering, tax fraud and other illegal activities.
The CTA reporting requirements will become effective on January 1, 2024, for newly formed companies (which do not otherwise qualify as exempt); provided, however, existing non-exempt companies have until January 1, 2025 to comply.
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Larry J. Brant
Editor
Larry J. Brant is a Shareholder and the Chair of the Tax & Benefits practice group at Foster Garvey, a law firm based out of the Pacific Northwest, with offices in Seattle, Washington; Portland, Oregon; Washington, D.C.; New York, New York, Spokane, Washington; Tulsa, Oklahoma; and Beijing, China. Mr. Brant is licensed to practice in Oregon and Washington. His practice focuses on tax, tax controversy and transactions. Mr. Brant is a past Chair of the Oregon State Bar Taxation Section. He was the long-term Chair of the Oregon Tax Institute, and is currently a member of the Board of Directors of the Portland Tax Forum. Mr. Brant has served as an adjunct professor, teaching corporate taxation, at Northwestern School of Law, Lewis and Clark College. He is an Expert Contributor to Thomson Reuters Checkpoint Catalyst. Mr. Brant is a Fellow in the American College of Tax Counsel. He publishes articles on numerous income tax issues, including Taxation of S Corporations, Reasonable Compensation, Circular 230, Worker Classification, IRC § 1031 Exchanges, Choice of Entity, Entity Tax Classification, and State and Local Taxation. Mr. Brant is a frequent lecturer at local, regional and national tax and business conferences for CPAs and attorneys. He was the 2015 Recipient of the Oregon State Bar Tax Section Award of Merit.
