NOTICE: On February 18, 2025, after publishing this article, the U.S. District Court of the Eastern District of Texas lifted the injunction that suspended the obligation for reporting companies to file Beneficial Ownership Information Reports. It is now mandatory for all non-exempt reporting companies formed to file a Beneficial Ownership Information Report. FinCEN has reset the deadline to March 21, 2025, for filing an initial, corrected, or updated report.

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While the filing of a Beneficial Ownership Information Report is currently voluntary, as noted on FinCEN’s website, that may change soon. The keyword there is “currently.” One nationwide temporary injunction was put in place by Hon. Jeremy D. Kernodle of the Eastern Texas District Court on January 7, 2025, for Smith v. US Treasury (CA No. 6:24-cv-336-JDK). Later, on January 23, 2025, the U.S. Supreme Court undid an earlier preliminary nationwide injunction from the Texas Top Cop Shop v. US Treasury. Because the Supreme Court did not resolve the broader question of whether a district court can grant a nationwide injunction, the injunction from the Smith case remains in place even after the Texas Top Cop Shop injunction was removed. Nothing about the Smith case was particularly notable, so one would expect the 5th Circuit on appeal to remove the preliminary injunction as soon as it is appealed.  

This puts the enforcement of the CTA in a temporary state of limbo. It is almost certain that the Smith preliminary injunction will not survive an appeal. Yet, as of today, the government has not appealed the injunction to the 5th Circuit Court of Appeals. We can only speculate as to why the government has not filed an appeal yet, but one reason may be due to shifts in the incoming administration. The new secretary of the Treasury, Scott Bessent, was sworn in on January 28, 2025. When asked about the Corporate Transparency Act, Secretary Bessent expressed support and stated: 

Beneficial ownership information can be a valuable tool to assist law enforcement efforts. We also must ensure that regulatory requirements are consistent with U.S. laws and appropriately tailored to provide such useful information to law enforcement while not creating unnecessary and substantial burdens or disproportionate legal consequences on law-abiding U.S. individuals and small businesses. If confirmed, I will work to ensure that Treasury’s efforts to combat illicit finance are focused on detecting, disrupting, and deterring malign actors while not creating unnecessary regulatory requirements that are inconsistent with U.S. law and harmful to law-abiding U.S. individuals and businesses. 

It seems likely that, under Secretary Bessent’s leadership, the government will file an appeal to the current injunction under Smith. When that will happen is anyone’s guess, but the injunction could be lifted within days of the appeal.

Other Challenges to the CTA

President Trump initially vetoed the Defense Authorization Act of 2020, the enabling legislation that contained the Corporate Transparency Act. Nevertheless, his veto may have been motivated by other factors. Congressional representatives have made various unsuccessful attempts to repeal the CTA since it was passed. Most recently, on January 25, 2025, just days after the U.S. Supreme Court ruling, Senator Tommy Tuberville (R-Ala.) and Congressman Warren Davidson (R-OH-08) re-introduced the Repealing Big Brother Overreach Act to repeal the CTA (Report). The U.S. Chamber of Commerce issued an open letter to President Trump on January 28, 2025, requesting that the administration delay enforcing the CTA until the legal questions of the CTA’s constitutionality have cleared the courts. 

The likelihood that Congress will repeal the bill anytime soon seems remote. The Department of Justice is more likely to challenge the current injunction. When the CTA was first passed, it was a bipartisan effort that overturned President Trump’s veto. While the composition of Congress has shifted, that shift does not appear significant enough to drive the repeal forward anytime soon. 

Weighing Whether to Wait

The irreparable harm identified in Texas Top Cop Shop and Smith are the costs associated with compliance and a violation of their rights under the Constitution (Texas Top Cop Shop Order, P.24; Smith Order, P. 30-31). Setting aside the constitutionality of the CTA, which by its nature is not measurable, we should just look at the numbers. In our experience, it will cost a single-member company around $200 to comply with the CTA. A more complex company arrangement can cost up to $2,000 when using the assistance of an attorney. Compare that to the fines that FinCEN imposes for non-compliance. Currently, the civil penalties are set at $606 per day that a company is out of compliance. Criminal penalties are capped at $10,000, but the civil penalties do not appear to have a cap, which means fines could be in excess of $221,190 per year. 

The bottom line is that it is more likely than not the CTA will come back to life relatively soon, and the risk of non-compliance can be exponentially greater than the cost of compliance. That is why we advise businesses to file now, even if it is temporarily voluntary.