U.S. District Court in Smith Case Lifts Its Nationwide Preliminary CTA Injunction: Small Businesses Must File CTA Reports by March 21, 2025

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On February 17, 2025, Judge Jeremy D. Kernodle of the U.S. District Court for the Eastern District of Texas stayed the final remaining nationwide preliminary injunction that had temporarily blocked enforcement of the Corporate Transparency Act (CTA). The injunction, which stayed the implementation of the final regulations listing filing deadlines and requirements of the CTA, prevented the U.S. Department of the Treasury from enforcing the CTA's beneficial ownership reporting requirements, was lifted after the U.S. government appealed the district court’s initial order.

In an order signed on February 17, 2025, Judge Kernodle referenced the U.S. Supreme Court’s January 23 ruling in McHenry v. Texas Top Cop Shop, Inc., which involved a separate challenge to the CTA’s reporting requirements and lifted the nationwide injunction. The decision aligns with the Supreme Court's prior ruling and reinstates the enforcement of the CTA across the country. As a result of this decision, FinCEN announced that the reporting requirements under the CTA are once again in effect; however, FinCEN also announced a thirty (30) day extension to the filing deadline, with the new filing deadline being March 21, 2025.

Outside of the courts, the legal landscape surrounding the CTA is evolving at a fast pace.  A bipartisan bill to extend the deadline for complying with the CTA’s reporting requirements passed unanimously in the house on February 10, 2025. The bill extends the deadline for filing beneficial ownership information to January 1, 2026. A companion bill was introduced in the Senate by Senator Tim Scott, the chairman of the Senate Banking Committee; however, the Senate has not voted on this bill. Note that both bills affect only reporting companies in existence before January 1, 2024.

In addition, FinCEN noted it is looking at potential relief for some reporting companies that it sees as low-risk companies, stating:

Notably, in keeping with Treasury’s commitment to reducing regulatory burden on businesses, during this 30-day period FinCEN will assess its options to further modify deadlines, while prioritizing reporting for those entities that pose the most significant national security risks.

FinCEN also intends to initiate a process this year to revise the BOI reporting rule to reduce burden for lower-risk entities, including many U.S. small businesses.

It remains to be seen what steps FinCEN will implement to reduce compliance burdens and which reporting companies will benefit.

As noted above, reporting companies must comply with the reporting requirements of the CTA no later than March 21, 2025 to avoid penalties.  We will continue to monitor legal developments involving the CTA and provide updates as needed.  As always, please do not hesitate to reach out to our team regarding any questions you may have concerning the CTA.