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Corporate Transparency Act Enforcement Remains Paused

UPDATE (January 24, 2025):

On January 23, 2025, the U.S. Supreme Court issued a stay of the nationwide preliminary injunction issued by a federal district court in Texas in December 2024 in the Texas Top Cop Shop litigation.

However, a second nationwide injunction against the Corporate Transparency Act (CTA) was issued earlier this month in the Smith v. Treasury litigation. The Supreme Court’s order in the Texas Top Cop Shop litigation does not specifically address the injunction in the Smith v. Treasury litigation. Because the injunction in the Smith v. Treasury litigation remains in effect, enforcement of the CTA remains paused.

FinCEN today stated that, because the nationwide injunction issued in the Smith v. Treasury litigation remains in place, reporting companies:

“are not currently required to file beneficial ownership information with FinCEN despite the Supreme Court’s action in Texas Top Cop Shop. Reporting companies also are not subject to liability if they fail to file this information while the Smith order remains in force. However, reporting companies may continue to voluntarily submit beneficial ownership information reports.”

The Texas Top Cop Shop and Smith v. Treasury litigations both originated in the U.S. District Court for the Eastern District of Texas. While the Supreme Court’s order in the Texas Top Cop Shop litigation does not specifically address the injunction in the Smith v. Treasury litigation, �鶹��ý’s CTA team would not be surprised if the injunction in the Smith v. Treasury litigation was to be stayed or lifted soon. Therefore, companies may want to keep preparing their beneficial ownership information reports so that, if CTA enforcement resumes, they will be ready to submit their required reports by the applicable filing deadlines.

UPDATE (27 December 2024):

Enforcement of the Corporate Transparency Act (CTA) has been paused again. The nationwide preliminary injunction that enjoined enforcement of the CTA is back in effect.

Three days after a motions panel of the Fifth Circuit Court of Appeals allowed enforcement of the CTA to continue, a separate merits panel of the Fifth Circuit reversed the motions panel’s decision. In its order pausing CTA enforcement, the merits panel stated that, “in order to preserve the constitutional status quo while the merits panel considers the parties’ weighty substantive arguments, that part of the motions-panel order granting the Government’s motion to stay the district court’s preliminary injunction enjoining enforcement of the CTA and the Reporting Rule is VACATED.”

The case remains before the Fifth Circuit Court of Appeals, as the plaintiffs have requested that their petition be heard before the full court. While litigation continues, the federal government is prohibited from enforcing the CTA.

Corporate Transparency Act Extensions Granted

UPDATE (24 December 2024):

After the client alert below was published, FinCEN extended the CTA filing deadlines for companies formed or registered in 2023 or earlier. The new filing deadline for these companies is January 13, 2025 (rather than January 1, 2025).

FinCEN also extended the filing deadlines for companies that were formed or registered in the United States, or whose original filing deadlines occurred, during the period when the nationwide injunction was in effect (December 3, 2024 through December 23, 2024). Companies formed or registered during the injunction period will have an additional 21 days from their original filing deadlines to file their initial reports with FinCEN. Companies whose original filing deadlines occurred during the injunction period will have until January 13, 2025 to file their initial reports with FinCEN.

Injunction Stayed: Corporate Transparency Act Enforcement Resumes

23 December 2024

The U.S. Department of Justice scored a victory in ongoing litigation over the constitutionality of the Corporate Transparency Act (CTA) when the Fifth Circuit Court of Appeals stayed the nationwide preliminary injunction issued earlier this month by a federal district court in Texas.

The preliminary injunction issued by the Texas district court applied nationwide and prohibited the federal government from enforcing the CTA. The Fifth Circuit’s decision stayed the injunction and allows the federal government to continue enforcing the CTA while litigation in Texas Top Cop Shop, Inc., et al. v. Garland, et al. continues.

As a result of the Fifth Circuit’s decision, all companies that are “reporting companies” for purposes of the CTA must comply with the CTA and file beneficial ownership information reports as provided in FinCEN’s regulations.

The Fifth Circuit’s order is effective immediately. Neither the Court nor the federal government has extended the filing deadlines under the CTA as of the time of this publication. The filing deadlines for reporting companies remain in effect — January 1, 2025 for companies formed in 2023 or earlier and 90 days after formation for companies formed in 2024.