Corporate Transparency Act Nationwide Injunction Reinstated by Fifth Circuit Court of Appeals
Brief Background:
In previous Legal Alerts we described the case Texas Top Cop Shop, Inc., et al. v. Garland, et al., in which the United States District Court for the Eastern District of Texas granted a nationwide preliminary injunction that stayed the enforcement of the Corporate Transparency Act (CTA) and the CTA’s reporting rules. We also described subsequent proceedings in which, on December 23, 2024, a motions panel of the Fifth Circuit Court of Appeals stayed the District Court’s injunction pending appeal. Shortly after the Fifth Circuit overturned the District Court’s injunction, the U.S. Financial Crimes Enforcement Network (FinCEN), which is the bureau of the United States Treasury that is responsible for administration of the CTA, posted an alert on its website allowing brief extensions of the filing deadlines under the CTA that were described in our prior Legal Alert. See HERE.
Fifth Circuit Court of Appeals Order Reimposing Nationwide Injunction:
On December 26, 2024, the merits panel of the Fifth Circuit Court of Appeals vacated the stay of the District Court’s preliminary injunction enjoining the enforcement of the CTA and its reporting rule. The Fifth Circuit’s explanation for the reversal of their order from a few days earlier was: “… 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 Fifth Circuit stated that the appeal of the District Court’s original ruling remains expedited with oral arguments set to be heard on March 25, 2025. Following the Fifth Circuit’s most recent order, FinCEN stated that reporting companies are not required to file Beneficial Ownership Information (BOI) Reports, but may continue to voluntarily submit BOI Reports.
What To Do Next:
The December 26 order of the Fifth Circuit Court of Appeals reinstates the nationwide injunction of the CTA and its reporting rules. Reporting companies that have yet to file a BOI Report, and are not exempt from the CTA’s reporting requirements, should closely follow developments in the case as the appeals process is moving rapidly with multiple changes as to whether a reporting company must comply with the CTA. We note that in response to the initial District Court injunction, FinCEN stated that reporting companies may continue to voluntarily submit BOI reports. As of this Legal Alert, the FinCEN BOI E-Filing System remains in operation. Because of the volatility of the question of whether there is a nationwide injunction, it may be prudent for reporting companies to continue gathering the necessary information to file a BOI Report and to decide to file BOI Reports on a voluntary basis so that they will be in compliance if the injunction is lifted.
We are following developments relating to the Texas Top Cop Shop case and plan to provide further updates. If you have any questions related to the CTA or the recent rulings, please reach out to your SGR attorney or any of the individuals listed below.
Tom Hong (Atlanta/Austin/Charlotte)
Brett Lockwood (Atlanta/Austin/Charlotte)
Eric Breitman (New York/Washington D.C.)
Adam Buss (Jacksonville/Miami/Tampa)
Ben Graham-Evans (London)
Michael Kraus (Atlanta – German Practice)
Stefan Buske (Munich)
For more information about the CTA, CLICK HERE.
***Updated as of December 30, 2024
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