Corporate Transparency Act: Nationwide Injunction in Place Again; All Filing Deadlines Suspended

In a continuing series of dizzying judicial actions, the U.S. Court of Appeals for the Fifth Circuit on Dec. 26, 2024, vacated the stay and reinstated the nationwide preliminary injunction enjoining enforcement of the Corporate Transparency Act (CTA) and the Reporting Rule, including the impending reporting deadlines. The appellate court said it was taking such action in order to preserve the constitutional status quo while that court considers the parties' weighty substantive arguments in an expedited appeal.

As a result, no filings under the CTA are currently required by law, including the initial beneficial ownership information (BOI) reports of Reporting Companies formed or registered prior to 2024 that were due by Jan. 13, 2025, under an extension granted by the U.S. Department of the Treasury's Financial Crimes Enforcement Network (FinCEN). Reporting Companies may want to delay filing for now until a decision by the Fifth Circuit on the merits appeal is reached. That appeal will address, among other issues, the constitutionality of the CTA. Voluntary filings are permissible, however.

Reporting Companies and affected individuals should carefully monitor developments and be prepared to file if the injunction is once again lifted.

Summary of Recent Events

Dec. 3, 2024. The U.S. District Court for the Eastern District of Texas entered an order enjoining enforcement of the CTA and its corresponding Reporting Rule.

Dec. 5, 2024. The government filed a Notice of Appeal.

Dec. 6, 2024. FinCEN announced on its BOI webpage: In light of a recent federal court order, reporting companies are not currently required to file beneficial ownership information with FinCEN and are not subject to liability if they fail to do so while the order remains in force. However, reporting companies may continue to voluntarily submit beneficial ownership information reports.

Dec. 11, 2024. The government filed with the district court "Defendant's Motion to Stay the Injunction Pending Appeal."

Dec. 13, 2024. The government filed an emergency motion with the Fifth Circuit to stay the district court's nationwide preliminary injunction.

Dec. 17, 2024. The district court denied the motion, and the government appealed.

Dec. 23, 2024. A motions panel of the Fifth Circuit granted the government's emergency motion for a stay pending appeal. The order also expedited the appeal to the next available oral argument panel to consider the merits of the case (Merits Panel).

Dec. 23, 2024. A few hours after the decision, FinCEN came out with a release postponing most reporting deadlines for a short period of time.

Dec. 24, 2024. The plaintiffs petitioned the Fifth Circuit for an emergency rehearing en banc, requesting that the Fifth Circuit reverse the decision staying the district court's preliminary injunction and requesting a decision by Jan. 6, 2025.

Dec. 26, 2024. The Fifth Circuit vacated that part of the motion's panel order granting the government's motion to stay the district court's preliminary injunction enjoining enforcement of the CTA and the Reporting Rule. Most important: The court, in vacating the stay, wrote:

However, 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.

Dec. 27, 2024. The Fifth Circuit issued an expedited briefing schedule:

• Feb. 7, 2025 – appellants' (government) brief due
• Feb. 21, 2025 – appellees' (plaintiffs) brief due
• Feb. 28, 2025 – appellants' reply brief
• March 25, 2025 – oral argument

Dec. 27, 2024. FinCEN on its BOI webpage issued a new alert stating:

In light of a recent federal court order, reporting companies are not currently required to file beneficial ownership information with FinCEN and are not subject to liability if they fail to do so while the order remains in force. However, reporting companies may continue to voluntarily submit beneficial ownership information reports.

Observations

• As the Fifth Circuit noted, the CTA implicates constitutional issues that cannot be resolved quickly. In effect, the message from the Fifth Circuit is clear: Compelling the plaintiffs to file beneficial ownership information reports before an expedited appeal could be decided would unfairly prejudice their claims and right to be heard – even if the plaintiffs do not ultimately prevail on the merits.
• The off again-on again-off again aspects of Texas Top Cop Shop have left Reporting Companies, beneficial owners, advisors and others affected by the CTA in a state of bewilderment. For now, at least, there appears to be a set path forward and a reprieve from imminent compliance obligations under the CTA's Reporting Rule.
• But that is not the end of the story. We are awaiting a decision in National Small Business United v. Yellen and perhaps other cases. Furthermore, when the Fifth Circuit rules in Texas Top Cop Shop, it is likely the nonprevailing party will appeal to the U.S. Supreme Court.
• Further, with the briefing schedule set for next year, after the Trump Administration comes into power, it is not clear what steps Congress or the executive branch will take regarding CTA enforcement.
• While the nationwide preliminary injunction remains in place, Reporting Companies have no obligation to comply with the BOI reporting obligation of the CTA, as was the case when the district court originally issued its order on Dec. 3.
• The injunction applies to initial reports, updates, corrections of Reporting Companies and other CTA-related filings, regardless of when a Reporting Company was formed. Reporting Companies, however, may continue to voluntarily file.

In conclusion, the situation remains fluid subject to the Fifth Circuit's decision and possible changes in direction by either the executive or legislative branch. Reporting Companies and persons impacted by the CTA should remain watchful, carefully monitor developments affecting CTA reporting requirements and be prepared to file if the injunction is once again lifted.

For more information or questions, please contact the authors.

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