On March 2, 2025, the U.S. Treasury Department issued a press release announcing that, for now, the Department will not enforce any penalties or fines associated with the beneficial ownership information reporting rule under the existing regulatory deadlines promulgated under the Corporate Transparency Act (CTA). Additionally, the Department announced that it will also refrain from enforcing “penalties or fines against U.S. citizens, domestic reporting companies, or their beneficial owners after forthcoming rule changes take effect[.]”
The Department intends to issue proposed rulemaking that will narrow the scope of the CTA to apply only to foreign reporting companies. Further details regarding the proposed rulemaking and the implementation timeline are expected in the coming weeks.
Although the Treasury Department stated it will not enforce the CTA, the law remains in effect, and other agencies may consider non-compliance in their own enforcement actions. Furthermore, if operating agreements, loan documents, franchise agreements, or other documents contain representations related to CTA compliance, those representations may remain binding, despite the Department’s non-enforcement stance. As a result, failure to comply with the CTA may still present risks for reporting companies, including under private contractual relationships and in enforcement actions by other governmental authorities.
Additionally, on March 3, 2025, the United States District Court for the Western District of Michigan (Southern Division) held on summary judgment that the CTA is unconstitutional under the Fourth Amendment as “an unreasonable search.” The Court enjoined enforcement of the CTA’s reporting obligations, but only to the plaintiffs in the case and their members.
The Morris, Manning & Martin, LLP CTA Task Force continues to closely track the CTA and is available to advise clients as the compliance requirements continue to change.
