The Corporate Transparency Act Rollercoaster Ride Is Far from Over

Just when professionals thought they finally had a handle on the Corporate Transparency Act (CTA), the plot takes another twist! On Feb. 5, 2025, the U.S. Department of Justice (DOJ), repping the Financial Crimes and Enforcement Network (FinCEN), dropped a surprise move, filing a notice to appeal the decision in the Samantha Smith case and asking for a pause on the current nationwide injunction. With courts pulling in different directions and FinCEN hinting at possible policy shake-ups, compliance pros and small businesses are left wondering: What’s next? Strap in, because this rollercoaster ride is far from over, and we’re breaking it down for you all!

A Tale of Two Courts

The CTA’s Beneficial Ownership Information (BOI) reporting has faced a rocky road in courtrooms nationwide. Legal twists keep everyone guessing and here's the backstory:

The Supreme Court Throws a Wrench Into Compliance

It all started with Texas Top Cop Shop, Inc. v. Garland, where the National Federation of Independent Business (NFIB) secured a preliminary injunction, blocking FinCEN from enforcing the CTA’s reporting requirements nationwide. Fast forward to December 17, 2024, U.S. District Court Judge Mazzant upheld that injunction. The government quickly appealed to the Fifth Circuit, which initially granted a stay—only for a different panel to reverse that decision days later, keeping the injunction in place.

CTA Stuck in Legal Limbo

On December 31, the DOJ sought to reinstate the CTA, arguing that Acts of Congress should remain in effect while legal battles unfold. The Court agreed, temporarily allowing enforcement. But just when it seemed settled, another twist: On January 7, 2025, a Texas judge ruled in Smith v. U.S. that the CTA was likely unconstitutional, reinstating the injunction nationwide. As of now, reporting remains voluntary, with no penalties for noncompliance—yet.

Pressure from Advocacy Groups Sparks Policy Rethink

Let’s be real—compliance isn’t cheap or easy, and FinCEN knows it. Advocacy groups, including the AICPA, have been vocal about the confusion and financial strain the CTA imposes on businesses. In a recent LinkedIn post, Vice President of Tax Policy & Advocacy Melanie Lauridsen also shared her views on longer extension. This has nudged the Treasury to reconsider its approach, particularly for smaller entities. Here’s what’s on the table:

• Grace Period Extension: The Department of Justice has hinted at a 30-day compliance extension if the Smith injunction is lifted. This is a small but meaningful breather for businesses scrambling to meet the CTA’s demands.
• Selective Tightening: The Treasury is looking to shift focus to high-risk entities while easing the burden on small businesses and low-risk organizations. It’s an attempt to balance national security goals with practical concerns.
• Future Modifications: There’s talk of tweaking the reporting requirements, deadlines, and even criteria to make compliance more manageable—especially for smaller players.

Why Professionals Should Pay Attention

The government’s softer tone might sound like a relief but don’t get too comfortable yet. The legal back-and-forth on the Corporate Transparency Act (CTA) is far from settled, and things could change overnight. If the courts rule in favor of the government, professionals might suddenly find themselves scrambling to meet compliance deadlines with little warning. And let’s not sugarcoat it, compliance comes at a hefty price. It’s estimated that businesses will collectively spend a jaw-dropping $22.7 billion in the first year alone. For small businesses, that’s a cost that could hit hard.

Here’s the silver lining: FinCEN’s e-filing system is still open, and voluntary filing is an option. Getting your client’s information in early might save you from a last-minute rush if enforcement kicks in again. So, staying ahead of the game now could save you a lot of stress—and maybe even money—down the road. Being proactive during this uncertain time is the smart move!

When Security Meets Simplicity

The CTA isn’t just about ticking boxes—it’s part of a broader effort to protect national security. Treasury officials have made it clear that they’ll prioritize entities posing significant risks. But here’s the challenge: can they simplify compliance for small businesses without watering down the CTA’s objectives? Time will tell. For now, the pause button gives businesses some breathing room. But don’t let your guard down. The CTA’s story is far from over, and being prepared could save you headaches—and dollars—down the road. Start gathering your beneficial ownership data now, even if filing is voluntary. Trust us, when the rules solidify, you’ll be glad you did. Stay tuned as this legal drama continues to unfold. Check out our previous article on the Corporate Transparency Act. And don’t miss out—subscribe to MYCPE ONE updates for the latest on compliance, tax, and legal developments. Whether it's breaking news or practical insights, we’ve got you covered.