Updated March 3, 2025

Businesses and professionals are scrambling to keep up with the shifting legal landscape as the Corporate Transparency Act (CTA) undergoes significant – i.e., multiple on again, off again – changes. It appears that the CTA is now permanently off as a result of a March 2, 2025, Treasury Department announcement saying Treasury would not enforce the CTA except as to foreign reporting companies (i.e., non-U.S. business entities that are registered to do business with any U.S. Secretary of State). 

What is The Corporate Transparency Act?

The CTA was passed into law as part of the National Defense Authorization Act for Fiscal Year 2021. The CTA requires most U.S. and some foreign business entities to report their “beneficial owners” to the Financial Crimes Enforcement Network (FinCEN) for the purpose of combating money laundering and terrorism financing; if the business entity is registered with any U.S. Secretary of State or similar agency, it is considered a “reporting company” and likely must file a beneficial owner information report (BOIR) with FinCEN. If a beneficial owner’s information changes, the reporting company must file an updated report with the new information.

Significantly, foreign and domestic business entities that are not registered with any U.S. Secretary of State’s office are not considered reporting companies and are not subject to the reporting requirements of the CTA.

Reporting Companies and Their Obligations

Reporting companies created before January 1, 2024, originally had until December 31, 2024, to report their beneficial owners, but effective January 1, 2024, new reporting companies were required to file within 45 days of the creation of the reporting company by the original filing with a Secretary of State. According to FinCEN’s FAQs, any person who willfully violates the CTA’s reporting requirements may be subject to civil penalties of up to $500 (indexed for inflation) for each day that the violation continues. A person who willfully violates these reporting requirements may also be subject to criminal penalties of up to two years imprisonment and a fine of up to $10,000. Potential violations include willfully failing to file a beneficial ownership information report, willfully filing false beneficial ownership information, or willfully failing to correct or update previously reported beneficial ownership information.

However, via Press Release dated March 2, 2025, the Treasury Department announced that it will not enforce the CTA except as to foreign reporting companies (i.e., non-U.S. companies that register with a U.S. Secretary of State).

Determining Beneficial Owners & Reporting Requirements for Different Entities

As to determining beneficial owners, a reporting company must report the individuals who either (1) exercise substantial control over the reporting company or (2) own or control at least 25 percent of the ownership interests in the reporting company.

Those who exercise substantial control over the reporting company are those individuals who are a senior officer (e.g., the company’s president, chief financial officer, general counsel, chief executive officer, chief operating officer, or any other officer who performs a similar function), those who have authority to appoint or remove certain officers or a majority of directors (or similar body) of the reporting company, and the important decision-makers for the reporting company. According to FinCEN’s FAQs, important decisions “include decisions about a reporting company’s business, finances, and structure. An individual that directs, determines, or has substantial influence over these important decisions exercises substantial control over a reporting company.” Thus, a reporting company must include as beneficial owners its Managers if an LLC, its general partners if a limited partnership, and its President or CEO and CFO, CLO, etc. if the reporting company is a corporation.

If the reporting company is owned at least 25% by another reporting company, the report must include all of the owner reporting company’s beneficial owners in its report. Alternatively, the report may include the owner’s FinCEN identifier, which includes all of its beneficial owner information. If at least 25% of the reporting company is owned by a trust, the reporting company must report as beneficial owners the trust’s Trustee, the trust’s beneficiary (if there is only one beneficiary), and the trust’s settlor if the trust is a revocable trust. Learn more about how trusts are affected by the CTA here.

Corporate Transparency Act: Injunctions, Appeals Court, and Ongoing Enforcement Challenges

Since its passage into law, critics have argued that the CTA is unnecessary, given that much of this information is already collected elsewhere, and further, that the CTA is an unconstitutional infringement on the beneficial owners’ right to privacy.  Thus, numerous lawsuits have been filed nationally seeking to prevent enforcement of the CTA, and several lower courts have issued injunctions preventing such enforcement. One such case (Texas Top Cop Shop, Inc. v. McHenry—formerly, Texas Top Cop Shop v. Garland) was appealed all the way to the U.S. Supreme Court, where on January 23, 2025, the Court granted the government’s motion to stay the nationwide injunction issued by a federal judge in Texas. In other words, the Supreme Court ruled that FinCEN could proceed with CTA reporting enforcement.

However, on January 7, 2025, a second Texas court had also issued a national injunction in Smith, et al. v. U.S. Department of the Treasury, et al., on February 5, 2025, 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 proceeds. In a recent Alert, FinCEN indicated that it intends to enforce the CTA reporting requirement if the injunction is lifted in the Smith case:

“If the district court’s order is stayed, thereby allowing FinCEN’s Reporting Rule to come back into effect, FinCEN intends to extend the reporting deadline for all reporting companies 30 days from the date the stay is granted (emphasis added).”

Then, on February 18, 2025, the court in Smith stayed its injunction as a result of the Supreme Court’s ruling in Texas Top Cop Shop. Not surprisingly given FinCEN’s statement above, on February 19, 2025, FinCEN announced the commencement of the 30-day window to file such that for most reporting companies all initial, updated, and/or corrected beneficial ownership reports are due no later than March 21, 2025.

Thereafter, on February 27, 2025, FinCEN announced that it would NOT enforce the March 21, 2025, deadline and that it would issue further guidance by that same date.

Then, on March 2, 2025, the Treasury Department (which oversees FinCEN) issued a Press Release saying it would not “ … not enforce any penalties or fines against U.S. citizens or domestic reporting companies or their beneficial owners” and that it would be issuing new rules limiting the application of the CTA to foreign reporting companies. Thus, as of March 2, 2025, the CTA is off again unless the business entity is a foreign reporting company.

Corporate Transparency Act: How to File

Presuming that the reporting requirements will commence eventually, the best preparation for the filing of the FinCEN beneficial owner report is to obtain a FinCEN Identifier for all of the reporting company’s beneficial owners. The FinCEN FAQs explain this process succinctly:

“Individuals may request a FinCEN identifier … by completing an electronic web form at https://fincenid.fincen.gov. Individuals will need to provide their full legal name, date of birth, address, unique identifying number and issuing jurisdiction from an acceptable identification document, and an image of the identification document. After an individual submits this information, they will immediately receive a unique FinCEN identifier.”

Rather than providing all of the above information in the beneficial owner report, the reporting company need only provide the FinCEN identifier for each beneficial owner, thereby greatly simplifying the reporting process. Further, by using FinCEN identifiers, if a beneficial owner updates his or her FinCEN identifier information, that update will automatically apply to any reporting company’s report which includes that beneficial owner, thereby eliminating the reporting company’s duty to file an updated report.

To file a beneficial owner report, visit FinCEN’s CTA website at https://www.fincen.gov/boi and click on the “File a report using the BOI E-Filing System.” Note that the link to obtain a FinCEN identifier, discussed above, is immediately below.

Click on the link that reads “BOI E-Filing: Beneficial Ownership Information (BOI) Reporting, Get Started.” You now have the option to either complete and file the report in pdf (hardcopy format) or online electronically. There is no difference in the information requested – in fact, the pdf version is identical to the online form, although the pdf option gives you an easy record of your filing. Select the option that is most comfortable for you.  If you select the pdf option, it will download the pdf form. If you select the electronic option, you will be taken to a secure site that tracks the pdf form.

Either way, follow the prompts and complete the requested information. Under Part 1, Reporting Company Information, be sure to select “Request to Receive FinCEN Identifier (FinCEN ID)” for the reporting company, which will simplify filing updates in the future, if necessary.

For detailed, step-by-step filing instructions, visit https://boiefiling.fincen.gov/resources/BOIR_E-File_PDF_Step-by-Step_Instructions.pdf

We’ll continue to provide CTA updates as needed. For more information, visit the beneficial owner information page of FinCEN at https://www.fincen.gov/boi.

This article is intended for informational purposes only. The information shared reflects an evolving situation and does not represent a guarantee or prediction of future outcomes. The results described may not be typical or applicable to every client or situation, and individual results may vary based on a variety of factors. Any decisions made based on this information should be considered in the context of your specific circumstances and investment objectives. Please consult with your investment adviser for personalized advice.

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