Trump Administration Continues Defense of Corporate Transparency Act, Indicates FinCEN’s Flexibility On Deadlines And Scope

As of our last client update on the Corporate Transparency Act (CTA) litigation (see CTA client alert), the U.S. Supreme Court, in an 8-1 ruling, lifted a nationwide injunction issued by a Texas trial court in Texas Top Cop Shop v. Bondi that had blocked CTA enforcement, but another nationwide injunction issued by another Texas trial court in Smith v. United States Department of the Treasury continued to stall CTA implementation.

Now, the new Trump Administration, in its first formal actions related to the CTA litigations, (i) on February 5, filed a notice of appeal and motion to stay the injunction in Smith, and (ii) on February 7, filed a brief supporting the constitutionality of the 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 this Court grants the stay, [the U.S. Financial Crimes Enforcement Network (FinCEN)] intends to announce that it will extend the compliance deadline for thirty days. During that period, FinCEN intends to assess its potential options to prioritize reporting for those entities that pose the most significant national security risks while providing relief to lower-risk entities and, if warranted, amending the Final Rule.” As always in this litigation chronicle, these developments leave CTA reporting companies facing 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. If you have any questions concerning this memorandum, please feel free to contact your regular contacts at the firm.