Trump Administration Continues Defense of Corporate Transparency Act Indicates FinCEN Flexibility on Deadlines and Scope
As we reported in our last client update regarding the Corporate Transparency Act litigation (see CTA Client Alert), the U.S. Supreme Court lifted, by an 8-1 decision, a nationwide order issued by a Texas court in Texas Top Cop Shop, v. Bondi, which had blocked CTA implementation. However, another nationwide order issued by a Texas court in Smith, v. United States Department of the Treasury, continued to stall CTA’s implementation. The Trump Administration has taken its first formal action in relation to the CTA litigations. On February 5, it filed a motion to stay the court injunction and a notice of appeal in Smith. On February 7, it filed a brief in support of the constitutionality of CTA in Texas Top Cop Shop. Given the Supreme Court’s decision in Texas Top Cop Shop to lift the injunction against CTA enforcement, we believe the government’s effort to stay the injunction in Smith is likely to succeed.
These steps by the Trump Administration are notable for two reasons.
First, while new presidential administrations routinely continue to support in court the constitutionality of laws passed prior to the new president taking office, that is not always the case, and it was uncertain where the CTA would fall under the Trump Administration. While no guarantee of permanency, for now, the Department of Justice continues to defend the constitutionality of the law and seek its prompt implementation.
Second, in the motion in Smith, the Administration provided its first indication of how it is thinking about CTA implementation: “As a matter of policy, Treasury continues to assess the potential burden of the Final Rule. If the Court grants the stay [the U.S. Financial Crimes Enforcement Network (FinCEN)] plans to announce that the deadline for compliance will be extended by thirty days. FinCEN will assess its options during that time to prioritize reporting of those entities that pose significant national security risk while providing relief to lower-risk organizations and, if warranted by the circumstances, amending the Final Rule. As usual in this litigation, these developments have left CTA reporting companies with considerable uncertainty. The current litigating position or policy considerations of the Administration may change, many of the terms in the Administration’s policy statement above remain undefined, and the courts’ decisions remain pending.
Finally, we note that oral argument in Texas Top Cop Shop, originally scheduled for March 25, 2025, is now calendared for April 1, 2025, before the Fifth Circuit. Please contact your usual contacts at the firm if you have any questions about this memorandum.
