CTA’s Beneficial Ownership Information Reporting Requirements Back in Effect Pending Outcome of Fifth Circuit Appeals

On February 18, 2025, a District Court judge in the Eastern District of Texas entered an order staying the last remaining nationwide injunction of the CTA’s Beneficial Ownership Information Reporting Rule (BOI Rule) in Smith v. U.S. Dep’t of the Treasury.  The BOI Rule requires certain entities formed or registered to do business in the U.S. (Reporting Companies) to report information about themselves and their natural-person beneficial owners to the Financial Crimes Enforcement Network (FinCEN), a bureau of the Treasury Department.  Following the court’s order, FinCEN issued an alert notifying Reporting Companies that the BOI Rule is back in effect with an amended deadline of March 21, 2025.

Summary of Prior Litigation

For more detailed information on the events leading up to the most recent Smith decision, please see our prior alerts here, here, here, here, and here.  In summary, two challenges against the BOI Rule were brought by plaintiffs in the Eastern District of Texas: the Smith case and McHenry v. Texas Top Cop Shop, Inc.  In Smith, the judge issued a preliminary injunction enjoining enforcement of the CTA against the named plaintiffs, as well as a nationwide stay of the effective date of the BOI Rule (the Smith Order), while in Texas Top Cop Shop, the judge issued a nationwide injunction blocking the enforcement of the BOI Rule.  The Department of Justice separately appealed both decisions to the United States Court of Appeals for the Fifth Circuit and moved to stay or limit the District Courts’ orders pending those appeals.  Ultimately, the U.S. Supreme Court stayed the Texas Top Cop Shop injunction pending resolution of the Government’s appeal, but the Smith Order remained in effect until February 17, 2025.

Latest Developments in Smith

Following the Supreme Court’s January 23, 2025, decision in Texas Top Cop Shop, Inc., the Smith court entered an order on February 18, 2025 granting the DOJ’s motion to stay the Smith Order “pending the disposition of the appeal.”  This decision means the CTA’s BOI Rule is once again in effect.

FinCEN’s Response and Implications for Reporting Companies

On February 18, 2025, FinCEN announced that it would extend the BOI Rule deadline until March 21, 2025 (in cases where the originally-applicable deadline had expired), in recognition of the fact that Reporting Companies may need additional time to comply with the requirements.  FinCEN also noted that it is assessing whether to “further modify deadlines, while prioritizing reporting for those entities that pose the most significant national security risks.”

Until there is further clarity, and given there could be intervening decisions, affected Reporting Companies should remain prepared to comply with the CTA’s filing requirements by the amended March 21, 2025, deadline.  As part of this process, Reporting Companies may elect to assess what information they must report to FinCEN in the event that the BOI reporting requirement is not delayed beyond the current March 21, 2025, deadline.  In many cases, this may require consulting with counsel and considering corporate ownership structures and responsibilities, as well as allocating time to compile the requisite personal information for any beneficial owners that must be reported.

Additional CTA Updates

While the nationwide injunctions and stays in Smith and Texas Top Cop Shop that prevented enforcement of the BOI Rule have been stayed, the law remains subject to numerous other legal challenges across the country.  The Eleventh Circuit is currently considering the constitutionality of the CTA on appeal from the District Court for the Northern District of Alabama in National Small Business Association (NBSA) v. Yellen.  For information on the NSBA court’s decision finding the CTA unconstitutional, please see our prior alert on the subject here.

In a separate challenge to the CTA in the District of Maine, a district court judge recently confirmed the constitutionality of the CTA on a motion for summary judgment, finding that the CTA was a permissible use of Congress’ constitutional authority to regulate interstate commerce.

On the legislative front, the House of Representatives passed HR736—a bill that would extend the deadline for complying with the CTA’s BOI Rule until January 1, 2026—on February 10, 2025.  HR736 was referred to the Senate Committee on Banking, Housing, and Urban Affairs on February 11.

Conclusion

For now, affected Reporting Companies should operate under the assumption that their BOI reports must be filed with FinCEN by March 21, 2025.  Reporting Companies should continue to monitor FinCEN’s announcement regarding changes to BOI reporting deadlines, as well as the Smith, Texas Top Cop Shop, and NSBA cases as they progress through the appellate process.

Crowell & Moring will continue to monitor these and other CTA-related cases and provide updates as appropriate.  Please do not hesitate to reach out to your Crowell & Moring contacts or the authors of this alert with questions.