Legal Challenges to the Corporate Transparency Act: The Case of Smith and Means v. U.S. Department of the Treasury

The Corporate Transparency Act (CTA), enacted to enhance transparency in corporate ownership and combat illicit activities, has faced significant legal challenges. A notable case is Samantha Smith and Robert Means v. U.S. Department of the Treasury, which has implications for businesses nationwide.

Case Overview

In January 2025, the U.S. District Court for the Eastern District of Texas issued a preliminary injunction in favor of plaintiffs Samantha Smith and Robert Means. The plaintiffs, who formed Limited Liability Companies (LLCs) under Texas law to hold real estate, argued that the CTA's reporting requirements exceeded federal authority, especially since their LLCs did not engage in interstate commerce. The court agreed, stating that the CTA expanded federal power beyond constitutional limits and intruded into areas traditionally governed by state law.

FinCEN's Position

The Financial Crimes Enforcement Network (FinCEN), responsible for implementing the CTA, has been actively responding to these legal developments. Following the injunction, FinCEN acknowledged that reporting companies are not currently required to file Beneficial Ownership Information (BOI) due to the court's order. However, FinCEN has indicated its intention to appeal the decision and has requested a stay on the current nationwide injunction. In the event the injunction is lifted, FinCEN plans to provide a 30-day filing extension for BOI reports.

AICPA's Comments

The American Institute of CPAs (AICPA) has been closely monitoring the situation. The AICPA advises that while BOI reporting remains voluntary amid ongoing legal challenges, businesses should prepare by gathering the necessary information to comply promptly if the reporting requirements are reinstated. The organization continues to advocate for clear guidance and reasonable timelines to ensure that businesses can meet their compliance obligations effectively.

Implications for Businesses

The legal challenges to the CTA, particularly the Smith and Means case, have created uncertainty regarding BOI reporting requirements. Businesses are advised to stay informed about the evolving legal landscape and be prepared to comply with BOI reporting if and when the requirements are reinstated. Consulting with legal and accounting professionals can help ensure that businesses remain compliant with any forthcoming regulations.

As the situation develops, staying informed and proactive will be key to navigating the complexities of the CTA and its associated reporting obligations.