CORPORATE TRANSPARENCY ACT UPDATE: Supreme Court Weighs In, Compliance Remains Voluntary Amid Legal Battles

Recent developments surrounding the?Corporate Transparency Act (CTA)?have left reporting companies in a state of uncertainty. While the?U.S. Supreme Court granted the government’s motion to stay a nationwide injunction?in?Texas Top Cop Shop, Inc. v. McHenry?on?January 23, 2025, a separate injunction issued in?Smith v. U.S. Department of the Treasury?remains in place. As a result, compliance with the CTA’s?beneficial ownership reporting requirements?is still?not mandatory?at this time.

Current Status: Reporting Remains Paused

Following the Supreme Court’s decision, the?Financial Crimes Enforcement Network (FinCEN)?issued guidance on?January 24, 2025, confirming that reporting companies are?not required to file beneficial ownership information?while the?Smith?injunction is in effect. See,??Alert:?Ongoing Litigation –?Texas Top Cop Shop, Inc., et al. v. McHenry, et al.,?No. 4:24-cv-00478 (E.D. Tex.) & Voluntary Submissions [Updated January 24, 2025]

Companies will also?not face liability?for failing to submit reports during this period. However, businesses?may still choose to voluntarily submit their information.

This pause impacts?corporations, nonprofits, and community associations?that would otherwise be required to comply with the CTA’s reporting mandates.

Ongoing Legal and Legislative Challenges

The?Community Associations Institute (CAI)?has also taken legal action against the?U.S. Department of the Treasury, Secretary Janet Yellen, and FinCEN, challenging the application of the CTA on?community associations. While CAI’s preliminary injunction request was denied, its?appeal in the Fourth Circuit is ongoing, with the government’s response due by?January 31, 2025.

Meanwhile, legislative efforts to?repeal the CTA?are gaining traction in Congress. Lawmakers have introduced?H.R. 425?and?S. 100, both of which aim to?fully repeal the Corporate Transparency Act?and its?beneficial owner reporting requirements.

What’s Next ?

With litigation and legislative challenges still pending, the fate of the?Corporate Transparency Act’s reporting mandates remains uncertain. Businesses, nonprofits, and community associations should continue to monitor these developments, as compliance requirements may change depending on court rulings and congressional action. See our prior article for?recommendations and links to the FinCEN Website to keep updated.