Is the Long Winding Road of the Corporate Transparency Act Coming to an End for U.S. Citizens and Domestic Reporting Companies?

On February 27, the Financial Crimes Enforcement Network (FinCEN) announced that it will not issue fines or penalties, or take other enforcement action, based on a failure of a reporting company to file or update beneficial ownership information (BOI) reports required by the Corporate Transparency Act (CTA), until a to-be-announced interim rule becomes effective and the relevant due dates pass. 

FinCEN also said that it intends to issue the interim rule extending the BOI reporting deadlines no later than March 21, and to solicit public comment for potential revisions to existing BOI requirements in anticipation of rulemaking later this year “to minimize [the] burden on small businesses….”

That is where we stood until March 2, when the U.S. Department of the Treasury (FinCEN is a bureau of it), announced that not only will there be no enforcement of penalties or fines associated with BOI reporting under existing rules, there will be no enforcement of any penalties or fines against U.S. citizens or domestic reporting companies or their beneficial owners even after the forthcoming rules become effective. 

The Treasury Department also said that it will be issuing a proposed rule narrowing the scope of the rule to foreign companies only.  Thus, with the Treasury Department’s announcement, it appears U.S. citizens and domestic reporting companies and their beneficial owners are no longer subject to fines, penalties or other enforcement actions for failing to comply with the CTA’s reporting requirements.  Its application to foreign reporting companies will have to await the Treasury Department’s rulemaking.

Not to be outdone in this saga, and in another blow to the CTA, on March 3, the U.S. District Court for the Western District of Michigan held that the CTA violated the Fourth Amendment to the U.S. Constitution.  Small Business Association of Michigan v. Yellen, Case No. 1:24-cv-314 (March 3, 2025).  This decision may or may not be appealed, given the Treasury Department’s current position, but its greatest effect will most likely be on state versions of the CTA adopted by states such as New York.

Phelps will continue monitoring developments related to the CTA and its implementing regulations.  In the meantime, we suggest reporting companies remain prepared to comply with the CTA’s reporting requirements if the preliminary injunction is overturned or otherwise modified.

Please contact Hal West, Trevor J. Haynes or any member of Phelps’ Business team if you have questions or need advice and guidance.