The legal drama surrounding the implementation of the Corporate Transparency Act (CTA), continues to resemble a game of “red light-green-light”. On February 18th, the U.S. District Court for the Eastern District of Texas (the Court) lifted the blanket nationwide restriction against FinCEN from enforcing the beneficial ownership information (BOI) reporting requirements under Phase I of the CTA. In other words, the “reporting companies” under the CTA will once again be required to report BOI by the new deadline of March 21, 2025.
On the heels of the Court’s ruling, FinCEN issued a Notice (FIN-2025-CTA1) granting the 30-day extension from their previous deadline to allow reporting companies time to comply with the CTA BOI obligations. Interestingly, the Notice also commits to reducing regulatory burden on businesses and indicates that the deadline may be extended once again. The priority will be reporting those entities that pose the most significant national security risks. The Notice also states that FinCEN intends to revise the BOI reporting rule to reduce the burden on certain “lower-risk entities”.
It is unclear what these changes will exactly look like or whether the delays and modifications to Phase I of the CTA (creating the BOI Database) will also delay the much-anticipated Phase III of the CTA. As you may recall, Phase III will change the Customer Due Diligence Rules for the Beneficial Owners of legal entity customers (CDDBO) that you will be required to comply with. Previously, FinCEN had a goal of issuing a proposed rule for Phase III by this spring, but it is likely that changes to Phase I may impact and delay any subsequent rulemaking. Also, keeping in mind, the rule-making “freeze” in place by the new administration’s Executive Order AND the fact that FinCEN is still enjoined from enforcing the CTA against the plaintiffs in National Small Business United v. Yellen could also be factors in delaying Phase III.
Keep in mind, all the current back and forth has not had any direct impact on the CDDBO responsibilities for financial institutions. You will continue to identify, verify and certify beneficial ownership information for legal entity customers per the current rules until the final phase is completed and we are given new marching orders from FinCEN.
Rest assured, we will continue to follow the drama and cover the new CTA rules as they come!
Published
2025/02/26