The Financial Crimes Enforcement Network (FinCEN) has issued a response following a nationwide injunction by a Texas federal court blocking enforcement of the Corporate Transparency Act (CTA).
In its response, FinCEN maintained its position that the CTA is constitutional but clarified that reporting companies previously subject to the CTA’s beneficial ownership reporting requirements “are not subject to liability if they fail to do so.” However, this protection remains in place only as long as the Texas federal court injunction is in effect.
Currently, reporting companies are not required to submit beneficial ownership reports and comply with the December 31, 2024, deadline; however, they may choose to voluntarily comply with the reporting deadline while awaiting further judicial developments.
While FinCEN has aligned with the Texas court’s current position regarding CTA compliance, the constitutionality of the CTA and the long-term obligations for reporting companies remain uncertain until a final judgment is reached. It is prudent for reporting companies to voluntarily comply with the upcoming reporting deadline, as there continues to be uncertainty surrounding the duration of any grace period for compliance if or when the injunction is overturned.
Attorneys at Barclay Damon will continue to monitor any judicial and legislative updates and further guidance from FinCEN regarding the CTA.
If you have any questions regarding the content of this alert, please contact Danielle Katz, counsel, at dkatz@barclaydamon.com; Karina Shahine, associate, at kshahine@barclaydamon.com; or another member of the firm’s Corporate Practice Area.