Key takeaways
- Pursuant to nationwide preliminary injunction, reporting companies under CTA currently not required to file beneficial ownership information with FinCEN.
- Department of Justice has asked Supreme Court to stay nationwide injunction pending determination CTA’s constitutionality by Fifth Circuit.
- FinCEN will continue to accept voluntary beneficial ownership submissions for reporting companies that choose to file.
- Given uncertainty surrounding CTA, companies should continue to monitor obligations and reporting requirements.
On December 26, 2024, a merits panel of the U.S. Court of Appeals for the Fifth Circuit reestablished a nationwide preliminary injunction against the enforcement of the Corporate Transparency Act (CTA) by the Financial Crimes Enforcement Network (FinCEN). Pursuant to this preliminary injunction, FinCEN issued an alert on December 27, 2024, stating that all reporting companies under the CTA are not currently required to file beneficial ownership information (BOI) with FinCEN and further, that all reporting companies are not subject to liability if they fail to file while the preliminary injunction remains in place. However, FinCEN also noted that reporting companies may continue to voluntarily submit beneficial ownership information reports.
Looking back: The December 26 ruling by the merits panel arose following a preliminary injunction issued by the U.S. District Court for the Eastern District of Texas in Texas Top Cop Shop, Inc. v. Garland, No. 4:24-cv-478, 2024 WL 4953814 (E.D. Texas Dec. 3, 2024). Specifically, the plaintiffs in Texas Top Cop Shop challenged the constitutionality of the CTA and the FinCEN Reporting Rule and sought a nationwide injunction to enjoin the government from enforcing the CTA and its January 1, 2025 compliance deadline. Following an appeal by the U.S. government for an emergency stay of the nationwide preliminary injunction, a motions panel of the U.S. Court of Appeals for the Fifth Circuit granted the emergency motion for stay on December 23. Texas Top Cop Shop, Inc. v. Garland, No. 24-40792, 2024 WL 5203138 (5th Cir. Dec. 23, 2024). Three days later, the merits panel vacated the decision, which resulted in the injunction becoming effective again.
Prior to the merits panel vacating the decision of the motions panel, FinCEN had extended the BOI reporting deadlines as follows:
- Entities created before 2024: Initial filings were required by January 13, 2025
- Entities with a filing deadline between December 3, 2024 and December 23, 2024: Initial filings were required by January 13, 2025
- Entities created between December 3, 2024 and December 23, 2024: Initial filings were required within 111 days after the date they were created
Looking forward: So for now, the preliminary injunction is to remain in place while the Fifth Circuit considers the merits of the arguments. Briefing on the matter is due to be completed by February 28, 2025. Oral arguments are scheduled for March 25, 2025.
However, on December 31, 2024, the Department of Justice asked the Supreme Court to halt the nationwide injunction against the CTA pending a decision on the merits from the Fifth Circuit. See Application for a Stay of the Injunction Issued by the U.S. District Court for the Eastern District of Texas, Garland. v. Texas Top Cop Shop Inc., No. 24A653 (U.S. filed Dec. 31, 2024). If the Supreme Court lifts the stay, the filing requirement will again return, and it is unclear what accommodations FinCEN will provide if the injunction is lifted.
In the meantime, companies that may be subject to the CTA’s reporting requirements should continue to monitor for changes to the CTA and its enforcement, as well as for additional guidance or alerts from FinCEN, which can be found on FinCEN’S website. We also recommend that reporting companies continue to evaluate their obligations under the CTA to ensure that they will be prepared to comply if the injunction is lifted.
Client Alert 2025-001