Author: Dean Smith (PhD, CFP, TEP, CPA, CA, RWM; Partner)
The CTA – Where are we now?
Since our January 6, 2025, posting, there have been developments regarding the U.S. Corporate Transparency Act (CTA).
On January 7, 2025, in the case of Smith, et al. v. U.S. Department of the Treasury, et al. 6:24-cv-00336 (E.D. Tex. 2025), the U.S. District Court for the Eastern District of Texas, Tyler Division, issued an order enjoining the government from enforcing the CTA against the plaintiffs and staying FinCEN’s regulations implementing the CRA.
On January 23. 2025 the U.S. Supreme Court said it will allow the government to implement the Corporate Transparency Act (“CTA”). Previously, on December 26, 2024, the U.S. Court of Appeals for the Fifth Circuit had issued a universal injunction to “preserve the constitutional status quo”. This meant that the CTA was, once again, suspended for everyone.
The Supreme Court stayed the Fifth Circuit’s universal injunction with respect to the Texas Top Cop Shop (Case No. 4:24-c-v478 (E.D. Tex) case. Justice Neil Gorsuch concurred in the decision, saying he would “go a step further and, as the government suggests, take this case now to resolve definitively the question whether a district court may issue universal injunctive relief.”
Justice Ketanji Brown Jackson dissented, saying she didn’t see a need for intervention because the government hadn’t proven exigency. “The Government has provided no indication that injury of a more serious or significant nature would result if the Act’s implementation is further delayed while the litigation proceeds in the lower courts,” she wrote.
Note the question here was not whether the CTA was constitutional or not. While the court struck down the Fifth Circuit’s injunction, the court did not rule as to the whether a district court could issue universal injunctive relief.
The Court also did not address the injunction in the Smith, et al case. As such, there is currently an injunction in place. On February 2, 2025, however, the Department of Justice, on behalf of the Department of the Treasury, filed a notice of appeal of the district court’s order, and, in parallel, has sought to stay that order as the appeal continues.
While the Texas Top Cop Shop case has garnered most of the attention, appeals are pending in the Appeal Courts for the Fourth, Ninth and Eleventh Circuits, from lower-level district court rulings that have split on the constitutionality of the law. Additional cases of interest are:
1) National Small Business United v. Yellen, No, 5:22-cv-01448 (N.D. Ala Mar 1, 2024)
2) Firestone v. Yellen, No. 3:24-cv-1034-SI (D. Or Sep 20, 2024)
3) Community Associations Institute v. Yellen, No. 1:24-cv-1597 (E.D. Va Oct 24, 2024)
Where are we now?
If the appeal, in the Smith et al case, is successful, FinCEN has announced that it will extend the reporting deadline for all reporting companies by 30 days from the date the stay, if any, is granted. Until such time, FinCEN is complying with the district court’s order for as long as it remains in effect. As such, FinCEN is not enforcing the CTA. Reporting companies, however, may continue to voluntarily submit their beneficial ownership information reports. Given, however, how fast the courts are moving, that may be of little solace.
In addition, oral arguments are to be heard in the Texas Top Shop Cop case have been scheduled for March 25, 2025.
It is possible that Congress may also act.
H.R. 10445 was introduced by Rep. Cole Tom (R-OK-4) and Rep. Chuck Edward (R-NC-11) on December 17th, 2024. One of the provisions proposes to change the reporting deadline for entities formed or registered before January 1, 2024, to January 1, 2026. The bill has been referred to the Committee on Appropriations, and in addition to the Committees on the Budget, and Ways and Means.
Rep. Warren Davidson (R-OH-8), on January 15, 2025, re-introduced H.R. 425 – Repealing Big Brother Overreach Act. This legislation would repeal the Corporate Transparency Act. The bill was referred to the House Committee on Financial Services.
It is also not clear as to what the position of the Trump administration is, though a desire to eliminate regulatory burdens has clearly been one of President Trump’s objectives (in my opinion).
