UPDATE: CTa Enforcement Resumes Amid Legal and Political Challenges
By: Colton L. Adams, Associate - Meridian Law
For business owners and legal professionals advising clients on compliance with the Corporate Transparency Act (CTA), the past few months have been a whirlwind of legal challenges, court rulings, and political developments. With recent federal court decisions—including from the U.S. Supreme Court—lifting previous injunctions, the CTA is again in full effect. As a result, businesses should prepare to comply before the revised March 21, 2025 deadline.[1]
What is the Corporate Transparency Act?
We have previously written about the CTA, which you can find here and here. The CTA is a federal law enacted in 2021 to curb money laundering, tax evasion, and illicit financial activity. The law requires many U.S. businesses to report their beneficial ownership information (BOI) to the Financial Crimes Enforcement Network (FinCEN).
The law applies primarily to small businesses, while larger corporations and certain entities (e.g., publicly traded companies and tax-exempt nonprofits) are exempt from the CTA filing requirements.
Legal Challenges Against the CTA
On January 23, 2025, the U.S. Supreme Court ruled in McHenry v. Texas Top Cop Shop, Inc.,[2] which effectively lifted a nationwide injunction blocking enforcement of the CTA and signaled that reporting requirements must proceed.
For context, the Supreme Court’s decision arose from a lawsuit in the U.S. District Court for the Eastern District of Texas, where the Texas federal court had issued a nationwide injunction on December 5, 2024,[3] citing concerns about the constitutionality of the CTA. The plaintiffs, a group of small businesses and business owners, argued that the CTA exceeded Congress’ authority under the Commerce Clause and violated the Tenth Amendment by regulating business entities formed under state law. Plaintiffs also raised concerns about violations of First Amendment free speech and Fourth Amendment concerns. Ultimately, however, the overwhelming issue is about the compliance burden, which is estimated to cost small businesses billions in administrative costs, unfairly targeting small businesses while exempting larger corporations and nonprofits.
However, following the Supreme Court’s decision, the Eastern District of Texas lifted its injunction, meaning the CTA is now enforceable nationwide.
Key Takeaways from the Supreme Court’s Decision:
CTA Enforcement Resumes: The Supreme Court stayed the December 5, 2024 injunction issued by the U.S. District Court for the Eastern District of Texas, pending disposition of the case’s appeal in the Fifth Circuit and any further appeals to the Supreme Court. This stay means businesses must comply with the CTA’s reporting requirements while litigation continues.
Potential for Further Review: The Supreme Court’s stay remains in effect until the Fifth Circuit rules on the case and until the Supreme Court decides whether to hear a full appeal. If a writ of certiorari is denied, the stay automatically ends, but if the Court grants review, the stay will remain in place until a final ruling is issued.
Universal Injunctions in Question: In his concurrence, Justice Gorsuch suggested that the Court should further decide whether lower courts can issue broad, nationwide injunctions—hinting at possible future restrictions on such judicial remedies. While this is not necessarily specific to the CTA, it is a constitutional question that may have broad implications.
Dissenting View: Justice Jackson dissented, arguing that the government had not demonstrated sufficient urgency to warrant emergency injunctive relief. She noted that the government itself had delayed implementation for years and questioned whether further delay would really cause irreparable harm.
Ongoing Legislative and Political Challenges
Despite the Supreme Court’s ruling, the fight is far from over, as the CTA remains highly controversial, and efforts to repeal or amend it are gaining traction.
Many business owners and attorneys have expressed frustration over FinCEN’s lack of clear guidance on compliance, confusion over exemptions and undue burden on small businesses, and concerns over privacy and government overreach regarding business ownership information.
On February 18, 2025, a group of 19 state Secretaries of State, including Tennessee Secretary of State Tre Hargett, echoed these concerns and called on President Trump to support the repeal of the CTA, arguing that it places an unfair burden on small businesses and that it has been poorly implemented.
At the same time, a bill, H.R. 8147 (“Repealing Big Brother Overreach Act”), has been introduced in Congress to eliminate the CTA altogether.[4] While it remains uncertain whether the bill will pass, the strong opposition from state officials and small business advocacy groups could influence legislative efforts.
Meanwhile, litigation challenging the CTA’s constitutionality is still ongoing and further appeals are expected as other courts weigh in on similar challenges. While some courts have upheld the CTA under the Commerce Clause, other cases—including a narrower injunction issued in Alabama—are still pending.
For now, however, CTA enforcement is moving forward nationwide as a result of the Supreme Court’s decision.
What this Means for Businesses
With the Supreme Court lifting the lower court’s injunction, businesses subject to the CTA must prepare to comply. Here is what you need to know:
March 21, 2025, Deadline:[5] Initially, the deadline for reporting BOI was January 1, 2025, but FinCEN has extended the deadline to March 21, 2025, to accommodate businesses affected by legal uncertainty.
Who Must File: As explained in one of our previous articles, the CTA applies to most small businesses—companies with fewer than 20 full-time employees and less than $5 million revenue. These covered business must report beneficial ownership information (BOI) to FinCEN by the March 21 deadline. However, there are exemptions, including publicly traded companies, tax-exempt organizations, and certain regulated businesses. Accordingly, business owners should review their entity structure carefully.
Severe Penalties for Noncompliance: Failure to file could result in civil and criminal penalties, including fines of up to $10,000 and up to two years in prison for willful violations.
Monitor Legal and Legislative Challenges: Given the ongoing court battles and congressional efforts to repeal the CTA, compliance requirements could change in the coming months. Business owners and attorneys should stay informed about potential updates from FinCEN, court rulings, and legislative action, and should consult an attorney experienced in corporate compliance to ensure they are meeting all requirements.
Conclusion
The CTA remains in effect for now, and businesses must comply with its requirements by March 21, 2025. However, the legal and political battle is ongoing, and further developments could impact enforcement.
Our firm is closely monitoring these issues. If you have questions about whether the CTA applies to your business or need assistance with compliance, contact our office today.
For more on business law and regulatory compliance updates, follow our firm’s blog or schedule a consultation with one of our attorneys.
*Disclaimer: The information in this blog post (“post”) is provided for general informational purposes only and may not reflect the current law in your jurisdiction. No information contained in this post should be construed as legal advice from Meridian Law, PLLC, or the individual author, nor is it intended to be a substitute for legal counsel on any subject matter. No reader of this post should act or refrain from acting based on any information included in or accessible through this post without seeking the appropriate legal or other professional advice on the particular facts and circumstances at issue from a lawyer licensed in the recipient’s state, country, or other appropriate licensing jurisdiction.
[2] McHenry v. Texas Top Cop Shop, Inc., 145 S. Ct. 1 (2025)
[3] Texas Top Cop Shop, Inc. v. Garland, 135 A.F.T.R.2d 2025-469 (E.D. Tex. Dec. 5, 2024)
[4] See https://www.congress.gov/bill/118th-congress/house-bill/8147/text.
[5] There are currently efforts being made to extend this deadline. H.R. 736 has been introduced in Congress to extend the BOI filing deadline to January 1, 2026 for companies in existence before January 1, 2024. See https://www.congress.gov/bill/119th-congress/house-bill/736/text.On February 10, 2025, it unanimously passed the House (vote of 408-0) and is now pending approval in the Senate. Given the overwhelming support it had in the House, it may very well be passed by the Senate as well. But for now, the current filing deadline remains March 21, 2025.