The Corporate Transparency Act: Coming Back Sooner, Not Later?
February 10, 2025 – Corporate AlertWhat’s New? In recent court papers, the U.S. Department of the Treasury (FinCEN) proposed a limited 30-day grace period for compliance with the Corporate Transparency Act (the "CTA") if FinCEN succeeds in reinstating the CTA. While FinCEN also indicated CTA relief for "lower-risk entities" may be forthcoming, FinCEN will not issue any such relief before the 30-day grace period begins to run. In light of FinCEN's strong litigating position, the brief grace period, and the delay and uncertainty surrounding any potential relief, every potential reporting company once again must re-evaluate if and when to restart its CTA compliance work.
Latest Government Action. On February 6, 2025, FinCEN filed a motion to lift the sole remaining nationwide preliminary injunction suspending the CTA's enforcement as issued in Smith vs. Department of Treasury (D.C., Texas Eastern (Tyler)). In addition, FinCEN filed papers for an immediate appeal to the Fifth Circuit in the event the District Court refuses to lift its own injunction. Armed with its victory in Texas Top Cop Shop, Inc. v. Bondi (in which the U.S. Supreme Court struck down a separate, earlier nationwide injunction also freezing the CTA), FinCEN stands in a strong position to knock down the preliminary injunction in Smith.
Limited Transition Relief. In its motion papers (and a corresponding update to its website), FinCEN offers several important insights about future CTA compliance. If the preliminary injunction is lifted, FinCEN intends to extend the compliance deadline only by 30 days (presumably from the date on which the injunction is lifted). In addition, during (and not before) the 30-day grace period, FinCEN "intends to assess its potential options to prioritize reporting for those entities that pose the most significant national security risks while providing relief to lower risk entities and, if warranted, amending" the CTA's implementing regulations.
Looking Ahead. For the moment as a policy matter, FinCEN appears committed to keeping the CTA alive (at least in some form), rather than leaving the CTA to languish in litigation. If the courts reinstate the CTA, broad-based CTA relief will have to come via repealing legislation currently under consideration in Congress.
In limiting the grace period to 30 days, FinCEN places immediate compliance pressure on every potential reporting company, even though the Smith injunction is still in effect and the litigation over its validity is continuing. Given the length of time that the CTA has been suspended, every reporting company at the very least will have to verify that any previously-collected information has not become stale. For entities with complex ownership structures or that need to contact third parties for information to include on a report or confirm an exemption, the short grace period is even more problematic.
FinCEN's intention to "prioritize reporting" for high-risk entities may eventually provide some relief from the CTA's compliance burden – presumably by offering more expansive exemptions for "lower risk entities." However, delaying regulatory guidance on any relief until the preliminary injunction is lifted and the 30-day grace period begins to run creates another "rock and hard place" dilemma for every potential reporting company - spend time and money to avoid missing the tight 30-day deadline only to find that FinCEN has provided a new exemption or other relief.
If you have any questions about this latest CTA development or need help choosing the right compliance strategy in this highly uncertain and fluid legal environment, please contact your Herrick attorney or any member of Herrick's CTA team through our Corporate Transparency Act Resource Center.
Mark A. Limardo at + 1 212 592-1494 or [email protected]
Theresa Fortin Balducci at + 1 212 592-1481 or [email protected]
Daniel A. Etna at + 1 212 592-1557 or [email protected]
Fred R. Green at + 1 212 592-5910 or [email protected]
Leah Kelman at + 1 973 274-2004 or [email protected]
Ellen L. Shapiro at + 1 212 592-1533 or [email protected]
Louis Tuchman at + 1 212 592-1490 or [email protected]
© 2025 Herrick, Feinstein LLP. This alert is provided by Herrick, Feinstein LLP to keep its clients and other interested parties informed of current legal developments that may affect or otherwise be of interest to them. The information is not intended as legal advice or legal opinion and should not be construed as such.