Corporate Transparency Act: With Compliance Delayed, What’s Next?

In today's episode of Womble Perspectives, we’re digging into some of the recent developments of the Corporate Transparency Act, or CTA, and why its compliance requirements remain on hold—for now.  

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Corporate Transparency Act Compliance Still on Hold, For Now

About the authors
Scott D. DeWald
Andrew F. Dixon
Alexander Hill
Laura A. Lo Bianco
Alexandria P. Murphy
Mark D. Patton
Matthew C. Sweger
Amanda L. Thatcher
Karen L. Witt

Transcript

Welcome to Womble Perspectives, where we explore a wide range of topics, from the latest legal updates to industry trends to the business of law. Our team of lawyers, professionals and occasional outside guests will take you through the most pressing issues facing businesses today and provide practical and actionable advice to help you navigate the ever changing legal landscape.

With a focus on innovation, collaboration and client service. We are committed to delivering exceptional value to our clients and to the communities we serve. And now our latest episode.

In today's episode of Womble Perspectives, we’re digging into some of the recent developments of the Corporate Transparency Act, or CTA, and why its compliance requirements remain on hold—for now.  

This episode will give you a clear picture of the CTA, current injunctions delaying its enforcement, and what businesses need to know moving forward. 

First, a quick overview of the CTA. Passed as part of the Anti-Money Laundering Act, the CTA requires certain businesses to report beneficial ownership information—things like who controls a company and who benefits from it—to FinCEN, the Financial Crimes Enforcement Network.  
The goal of this law? To combat money laundering, tax evasion, and other illicit activities by increasing transparency in corporate structures. While this makes sense from a national security and compliance perspective, it has understandably added significant compliance concerns for many business owners.  

By requiring reporting companies to submit these beneficial ownership information reports, FinCEN creates a database that government agencies can access to investigate financial crimes or any activity that poses risks to national security.  
 
So, where does the CTA stand today? The enforcement of its reporting obligations is currently on hold due to legal challenges. Here’s what’s happened so far:  

Earlier this year, the U.S. Supreme Court lifted a nationwide preliminary injunction on enforcing the CTA, specifically in the case of Texas Top Cop Shop, Inc. v. Bondi. However, a separate injunction issued in Smith v. U.S. Department of the Treasury still stands, effectively halting any mandatory compliance requirements.  

For now, companies aren’t legally required to submit beneficial ownership information reports, thanks to that Smith injunction. That said, voluntary submissions are still allowed, and importantly, there are no penalties for non-compliance under this current injunction.  

Meanwhile, the federal government isn’t sitting idle. They’ve filed an appeal to the Fifth Circuit Court to lift the injunction in the Smith case. If that happens, the CTA’s reporting obligations could go into effect within as little as 30 days. 

To better understand where things might go, let’s look at how we got here.  

Initially, two nationwide injunctions placed a pause on CTA enforcement. First, the case of Texas Top Cop Shop resulted in an injunction issued by the U.S. District Court for the Eastern District of Texas. After the Supreme Court lifted that injunction, the separate injunction in the Smith case became the primary hurdle.  

Both cases question the constitutionality of the CTA. While neither has reached a final decision on that issue, the rulings so far focus on whether the government can enforce the CTA while litigation continues.  

Additionally, the federal government has introduced some flexibility as part of its argument in court. Officials previously stated their intention to extend compliance deadlines by 30 days if they win their appeal in the Smith case. Plus, there’s talk of reducing compliance burdens for low-risk entities to focus enforcement on cases that present significant risks to national security.
So, what does the future hold for the CTA and its compliance requirements? Here are the possible scenarios that businesses need to consider.  

If the Smith injunction is lifted, reporting obligations could resume within 30 days, as FinCEN has hinted.  

The ongoing litigation in Smith and Texas Top Cop Shop could lead to rulings that either cement or eliminate the CTA’s requirements, depending on how courts evaluate its constitutionality.  
Legislative intervention is a wildcard. It’s possible Congress could repeal the CTA altogether if it becomes too much of a legal and political headache. 
 
Finally, businesses should prepare for potential updates to FinCEN’s reporting guidelines. These could include measures designed to reduce burdens on low-risk entities, an approach that reflects the government’s broader enforcement priorities.

In the meantime, what should businesses be doing during this legal limbo? Here are some recommendations to stay proactive and prepared.  

First, review your potential reporting obligations. Even though reporting isn’t currently required, having a clear understanding of what’s expected when enforcement begins can save you a lot of stress later.  

Second, monitor ongoing developments. Whether it’s court decisions, legislative updates, or FinCEN announcements, staying informed is critical.  

Third, consider voluntary filing. Some companies may choose to submit beneficial ownership information reports  voluntarily as a way to get ahead of compliance requirements and ensure readiness.  

Finally, update any previously reported information. If you’ve already filed a beneficial ownership information report and your beneficial ownership information has changed, update or correct it for accuracy.  

As we’ve explored today, navigating compliance for the Corporate Transparency Act is anything but straightforward. With injunctions in place, litigation ongoing, and potential legislative changes on the horizon, businesses are facing a lot of uncertainty.  

The key takeaway? Stay informed, stay proactive, and prepare for what’s next. By doing so, your organization can minimize risk and ensure smooth compliance if reporting obligations resume.  

Thank you for listening to Womble Perspectives. If you want to learn more about the topics discussed in this episode, please visit The Show Notes, where you can find links to related resources mentioned today. The Show Notes also have more information about our attorneys who provided today's insights, including ways to reach out to them.

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