Litigation continues regarding the enforceability of the Corporate Transparency Act (the “CTA”) (31 U.S.C. Sec. 5336). In recent weeks, significant developments have unfolded regarding implementation of the CTA, which had previously required that most business entities disclose their “beneficial owners” to FinCEN, a federal agency. As of the writing of this blog post, implementation of these requirements remains subject to a nationwide injunction.
Recent Rulings
On December 3, 2024, the U.S. District Court for the Eastern District of Texas issued an injunction temporarily suspending enforcement of the CTA. This injunction suspends the requirement that businesses report their beneficial ownership information (“BOI”) report to FinCEN. For companies formed prior to 2024, this ruling halts their obligation to submit their initial BOI reports to FinCEN before the January 1, 2025 deadline. For businesses created in 2024, the ruling suspends their obligation to report within 90 days of formation.
Subsequently, the Department of Justice (“DOJ”) filed an emergency motion asking for the injunction of December 3rd to be lifted. On December 23, 2024, a three-judge motions panel of the Fifth Circuit Court of Appeals granted that emergency motion, staying the injunction and essentially reinstating the CTA and its requirements. The court even found that “the government has made a strong showing that it is likely to succeed on the merits in defending CTA’s constitutionality.” At that time, FinCEN allowed a filing extension for certain entities.
On December 26, 2024, the full panel of Fifth Circuit judges heard an appeal and reversed the earlier decision, vacating the stay and reinstituting the nationwide injunction. Thus, once again, the CTA’s requirements were put on hold.
Finally, on December 31, 2024, the DOJ filed an emergency “Application for a Stay of the Injunction” with the U.S. Supreme Court, seeking to stay the injunction pending the Fifth Circuit’s review of the matter. The Supreme Court has not yet weighed in on this matter.
What Now?
This flurry of legal challenges has left the status of the reporting requirement under the CTA in limbo. Currently, oral arguments are scheduled before the Fifth Circuit on March 25, 2025. As such, the nationwide injunction is likely to remain in place through that date.
Businesses that have not yet reported with FinCEN should remain aware of any changes. If the injunction is lifted, or if the Supreme Court grants a stay, companies may be required to file their report without much notice.
In the meantime, voluntary submissions of reports to FinCEN are still accepted. FinCEN has updated their guidance, stating that companies may submit their reports, but due to recent litigation, they are not required to.