Corporate Transparency Act Update: The On-Again, Off-Again Law and What It Means for You
Last year, we posted a comprehensive blog about the Corporate Transparency Act (CTA). This law came into effect in January 2024 with the purpose of combating financial crimes such as money laundering, tax evasion, and terrorism financing. Through this act, certain businesses are required to report their beneficial ownership information (BOI) to the Financial Crimes Enforcement Network (FinCEN), a US Department of the Treasury bureau.
A few weeks before the deadline for reporting on January 1, 2025, a Texas judge deemed the law unconstitutional and filed a nationwide injunction, blocking the enforcement of the CTA. This was just the beginning of a chaotic legal back-and-forth. The injunction was later lifted, reinstating the CTA’s reporting requirements–only for it to be halted again.
As of January 2025, business owners are not required to file reports under the CTA. However, the act’s future remains uncertain as legal challenges continue. Below, we break down the key arguments against the CTA, what these legal shifts mean for business, and how to navigate estate planning amid the uncertainty.
The CTA’s Legal Rollercoaster: A Timeline of Confusion
December 3, 2024: A Texas federal court ruled the CTA likely unconstitutional and issued a nationwide injunction blocking its enforcement.
December 6, 2024: FinCEN announced that reporting companies were not required to file BOI reports but could still submit them voluntarily.
December 20, 2024: A federal funding bill did not include an expected extension of the CTA filing deadline that was in an earlier draft, leading to confusion about deadlines if reinstated.
December 23, 2024 (Morning): The Fifth Circuit lifted the injunction, reinstating the CTA nationwide (except for specific plaintiffs in a separate case).
December 23, 2024 (Later that Day): FinCEN extended the filing deadline for companies formed before 2024 to January 13, 2025, but kept deadlines intact for others.
December 26, 2024: A different Fifth Circuit panel reversed the stay, restoring the nationwide injunction and making CTA compliance voluntary again.
December 27, 2024 – FinCEN confirmed that BOI reports were no longer required but could still be filed voluntarily.
December 31, 2024 – The federal government petitioned the Supreme Court to reinstate the CTA, with a response deadline set for January 10, 2025.
January 23, 2025 – The Supreme Court granted the government’s motion to stay the Texas Top Cop Shop injunction, but a separate injunction (Smith v. US Department of the Treasury) remains in place. As a result, businesses are still not required to file BOI reports with FinCEN.
These rapid shifts have left business owners in limbo, unsure whether compliance will eventually be required. The ongoing court battles will determine whether the CTA is permanently struck down or reinstated. The situation remains fluid, and we’re keeping a close watch for further updates.
What makes the CTA Unconstitutional?
Below are the main concerns about the CTA that may have persuaded the federal court’s decision:
Violation of Privacy Rights
Reporting beneficial ownership information may be considered a violation of the Fourth Amendment, which protects against unreasonable searches and seizures. Also, unsecured disclosure of personal information to the government raises privacy concerns.
Overreach of Federal Authority
The CTA can be seen as the federal authority exercising control over small businesses and private individuals, infringing on state sovereignty under the Tenth Amendment.
Due Process of Law
Reporting BOI may be violating the Fifth Amendment’s Due Process Clause, meaning having legal proceedings that are fair, regular, and in accordance with established rules and principles. The CTA reporting may result in vague, burdensome, and unclear compliance, resulting in penalties and fines.
Potential Data Misuse
Although FinCEN’s database is not open to the public, it can be misused or experience data breaches. The release and misuse of this data violate individual rights to security and privacy.
What the Nationwide Injunction Means
A nationwide injunction is a legal order that blocks the enforcement of a law across the entire country. When the CTA was first halted in late 2024, businesses were relieved that they no longer had to rush to meet the January 2025 reporting deadline. However, the injunction was later lifted, briefly reinstating the reporting requirements—only for the CTA to be halted again a few weeks later. This legal back-and-forth has left businesses uncertain about their long-term obligations.
For now, businesses do not need to file reports under the CTA. However, if the injunction is lifted again or the law is revised, compliance may be required in the future.
Potential for Legal Precedent
The ongoing legal battle over the CTA is about more than whether or not you have to file a BOI report. It could set a precedent for how much authority the federal government has over small businesses. If the injunction is upheld, Congress’s ability to enact similar laws may be limited in the future.
Estate Planning Amid the CTA Uncertainty
Estate plans often rely on business entities like LLCs, partnerships, or corporations to manage and protect assets. You can achieve your estate planning goals even with the injunction and subsequent developments by taking the following steps:
Work with an estate planning attorney. We can advise you on the best methods and tools that can work with the CTA requirements while achieving your objectives for privacy, tax efficiency, or asset protection.
Prepare for possible compliance. Collect information and prepare for BOI reporting so that you can stay ahead if compliance is required in the future.
Stay informed on legal developments. Keep up to date with CTA news or related court rulings. The injunction’s outcome will determine whether you are required to comply or not.
Consider other strategies. If maintaining privacy is a top priority for your estate planning, consider alternative strategies that are not affected by the CTA, such as irrevocable trusts.
The CTA and Estate Planning with Rilus Law
At Rilus Law, we understand how frustrating and confusing the CTA’s shifting legal status has been for business owners. With the reporting requirements currently on hold, we have resumed LLC formations as part of our estate planning services. However, given the ongoing legal battles, the CTA’s fate is far from settled. We’re closely monitoring developments and will keep you updated on any changes that may impact your estate or business planning. Stay tuned to our emails and social media for the latest updates, and don’t hesitate to reach out if you have questions about how the CTA—or its potential return—could affect you.
