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US Beneficial Ownership Reporting 2025 Deadline Extended Amid Legal Battle

The United States has taken a significant step in the fight against financial crime with the enforcement of the Corporate Transparency Act (CTA) requesting full disclosure of beneficial ownership. The law, designed to enhance transparency and curb money laundering, mandates that businesses disclose their real beneficial owners to the Financial Crimes Enforcement Network (FinCEN), a unit of the U.S. Treasury Department. However, the enforcement of this regulation has faced legal hurdles, leading to uncertainty for businesses across the country.

A recent ruling by a federal judge in Texas temporarily halted the implementation of this law, citing constitutional concerns. This led to an initial pause in enforcement. However, with the suspension lifted, FinCEN has announced a new deadline of March 21, 2025, for most entities to comply with the reporting requirements. The reinstatement of the rule signals a renewed push toward corporate transparency, even as legal challenges continue.

The Corporate Transparency Act, enacted in 2021, was introduced as a landmark measure to prevent the misuse of anonymous corporate structures for illicit activities. Under this law, most corporations and limited liability companies (LLCs) must report information about their true beneficial owners. FinCEN will then analyze this data to prevent money laundering, tax evasion, and other financial crimes.

However, a legal dispute over the constitutionality of the law has complicated its rollout. U.S. District Judge Jeremy Kernodle, based in Tyler, Texas, ruled on January 7, 2025, that the Corporate Transparency Act was unconstitutional. He argued that the federal government exceeded its authority by regulating businesses formed under state laws, regardless of whether they engaged in interstate commerce.

In response to the ruling, FinCEN temporarily suspended enforcement. But the situation took another turn when the U.S. Supreme Court intervened on January 23, 2025. The Court paused a separate ruling by another Texas judge, Amos Mazzant, who had also found the law unconstitutional and blocked its enforcement. This Supreme Court action suggested that there might be legal grounds to reinstate the Corporate Transparency Act while the legal appeals process unfolds.

On February 19, 2025, Judge Kernodle lifted his own injunction, thereby reinstating the law’s enforcement. The U.S. Department of Justice is now appealing his earlier ruling in an attempt to fully restore the act.

Implications for Businesses and Compliance Requirements

With the legal roadblock removed, FinCEN has reaffirmed that businesses must comply with the Corporate Transparency Act by the new March 21, 2025, deadline. This extension allows companies additional time to gather the necessary information and ensure compliance.

The law affects a broad spectrum of businesses, including:

Corporations and LLCs registered under state law
Foreign entities operating in the United States
Shell companies used for asset holding or investment purposes

What Businesses Must Do

Identify Beneficial Owners: Companies must disclose the identities of individuals who own or control at least 25% of the entity or who exercise substantial control over business operations.
Submit Information to FinCEN: This includes names, birthdates, addresses, and a unique identifying number such as a passport or driver’s license.
Maintain Updated Records: Any changes in ownership or control must be promptly reported to FinCEN.

Failure to comply can result in severe penalties, including fines of up to $10,000 and imprisonment for up to two years. Given these consequences, it is crucial for affected businesses to prepare now to meet the new deadline.

Political and Business Community Reactions

The reinstatement of the Corporate Transparency Act has triggered mixed reactions across the political spectrum and the business community. Supporters argue that the law is essential to preventing financial crimes, increasing corporate accountability, and strengthening global anti-money laundering efforts. They contend that transparency in business ownership structures is necessary to deter illicit activities, such as tax fraud and terrorist financing.

On the other hand, opponents of the law, particularly small business advocacy groups and conservative organizations, view it as an overreach of federal power. The plaintiffs in the case, represented by the Texas Public Policy Foundation, have criticized the requirement, arguing that it places an unnecessary burden on small businesses with limited resources. They believe that compliance costs and administrative requirements will disproportionately impact lower-risk entities, which may not have the legal and financial resources to navigate the reporting process.

The Biden administration has strongly defended the law, emphasizing its role in strengthening the U.S. financial system against exploitation by criminals and corrupt actors. The administration has also signaled that it may consider adjustments to the regulation to alleviate compliance burdens on smaller businesses while maintaining the law’s core objectives.

Conclusion: What Comes Next?

With the March 21, 2025 deadline fast approaching, businesses must now take urgent steps to comply with the beneficial ownership reporting requirements. While the legal challenges are far from over, the reinstatement of the law underscores the government’s commitment to financial transparency and anti-money laundering enforcement.

Entities that have delayed compliance due to uncertainty must now act quickly to avoid penalties. It remains to be seen whether further modifications to the law will be made to address concerns from small businesses. However, for now, FinCEN’s directive stands, and companies should ensure they meet the reporting obligations before the deadline.