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.