CTA is Back On (Redux)


Yesterday, in Smith v. U.S. Department of the Treasury, et al., 6:24-cv-00336 (E.D. Texas), the U.S. District Court for the Eastern District of Texas stayed its order dated January 7, 2025, which enjoined enforcement of the beneficial ownership information reporting requirements under the Corporate Transparency Act (the โ€œCTAโ€) nationwide.  The stay of this order allows the CTAโ€™s reporting requirements to once again be enforced.  Today, FinCEN announced that most reporting companies that would have been required to file reports with FinCEN as of December 31, 2024 will have a 30-day extension of time to file, with a new due date of March 21, 2025.  A few reporting companies that had previously been given disaster-related extensions may continue to use the previously extended deadline if later than March 21, 2025.  In addition, the plaintiffs in National Small Business United v. Yellen, No. 5:22-cv-01448 (N.D. Ala) continue to be exempt from reporting requirements under the CTA.

FinCEN noted that it will be using this 30-day period to โ€œassess its options to further modify deadlines, while prioritizing reporting for those entities that pose the most significant national security risks.โ€  However, it is unclear whether there will be any changes that would prevent a reporting company that is currently required to report under the CTA from reporting or whether those proposed changes will only be forward-looking.  FinCEN also noted that it intends to start a process โ€œthis yearโ€ to revise the beneficial ownership information reporting โ€œto reduce the burden for lower-risk entities, including many U.S. small businesses.โ€  Again, it is unclear whether any relief will be forthcoming from the FinCEN before the March 21, 2025 reporting deadline for companies that were in existence as of January 1, 2024 and had an original deadline of December 31, 2024.  Meanwhile, the House unanimously passed a bill on February 10, 2025, which seeks to extend the CTAโ€™s reporting deadline for these entities to January 1, 2026, and a companion bill was introduced in the Senate last week.  While you may not want to allow the reporting requirements tail to wag the entity-formation dog, it may be worthwhile to wait for further guidance from FinCEN before creating a new reporting company that would currently be subject to a 30-day reporting window if the client was adverse to reporting. 

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Mohineet Khosla received her J.D. from New York University School of Law in 2001. Following law school, Mohineet practiced for over a decade at Milbank LLP in NYC.

Her practice included providing sophisticated estate planning advice to high net worth families, both domestic and international. Mohineet has also represented clients in audits before the Internal Revenue Service and fiduciaries on complex estate and trust administration matters.

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