The landscape for compliance with the Corporate Transparency Act (CTA) has now become clear at least for now.  The Department of the Treasury’s FinCEN has issued a statement instructing that all entities created in the United States and their beneficial owners are exempt from the requirement to report beneficial ownership information (BOI) to FinCEN.  The exemption applies equally to persons who have previously reported BOI information and those that have not.  The change came by way of the publication of an interim rule that revised the definition of “reporting company” to mean only those entities that are formed under the law of a foreign country and that have registered to do business in any U.S. State or Tribal jurisdiction.  Until there is some modification of this rule, entities created in the United States have no requirement to report with respect to their beneficial owners, whether they are US persons or non-US persons.

The exemption does not, however, apply to existing companies formed outside of the United States.  Such existing foreign companies must report their beneficial ownership information by April 25, 2025.  Any foreign entity that becomes a reporting company after March 25, 2025, will need to file an initial report within 30 calendar days after it receives notice that it has been registered to do business in any state.  However, such foreign reporting companies are not required to provide any BOI information for US persons.

Please direct any questions regarding the CTA to our experienced corporate attorneys Randolph McCalla (rmccalla@lubinolson.com) and Audrey Baker (abaker@lubinolson.com).

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With the January 1, 2025 deadline for reports under the Corporate Transparency Act (CTA) quickly approaching, the United States District Court for the Eastern District of Texas has created significant ambiguity regarding the deadline.  On December 3, 2024, the court issued an injunction preventing the enforcement of the CTA in its entirety.  Texas Top Cop Shop, Inc. v. Garland, No. 4:24-cv-478 (E.D. Tex.).  The Texas injunction specifically stayed the January 1, 2025 reporting deadline, and made the injunction applicable nationwide.  The Texas litigants reportedly only asked that the injunction apply to the plaintiffs in that case.  In March of this year, a federal court in Alabama took exactly that narrower approach and made its injunction apply only to the specific plaintiffs.  National Small Business United v. Yellen, No. 5:22-cv-01448 (N.D. Ala.).

The Department of the Treasury’s FinCEN can be expected to appeal the Texas decision, and ask the District Court to stay the new injunction pending appeal, or ask the court to narrow its application to only the litigants in the case.  The request to narrow the injunction or stay its application may be decided during December 2024, but an appeal would extend well into the early part of 2025.  Meanwhile, businesses nationwide are left to guess what to do for the BOIR deadline.

In the context of the earlier Alabama NSBU case, FinCEN made its expectations clear – companies will be required to comply with CTA.  FinCEN issued a release notifying companies that the reprieve granted in the NSBU case applies only to the NSBU plantiffs.  https://fincen.gov/news/news-releases/updated-notice-regarding-national-small-business-united-v-yellen-no-522-cv-01448  FinCEN has not yet issued a bulletin with its expectations in light of the most recent Texas case.  It seems unlikely that Congress will step in to clarify the deadline or amend the CTA to more clearly invoke the Constitution’s grants of lawmaking authority.  Because it is unclear what FinCEN will require, and what consequences might stem from company’s delaying BOIRs, the safest course is for companies to continue their BOIR filing processes.

We will continue to monitor the implications of this ligation on the obligations of entities under the CTA and follow up with additional guidance if this injunction is lifted and/or if there are any further developments regarding this issue. If you have questions arising out of the CTA and/or of the aforementioned preliminary injunction, please feel free to contact us.

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