Update: CTA’s Beneficial Ownership Information Reporting Requirements Back On Hold; Nationwide Injunction Reinstated Following Order by Fifth Circuit Merits Panel

This Alert is an update to our Alert dated December 24, 2024, available here and supersedes the information set forth in the December 24, 2024 Alert in its entirety.

On December 26, in a rapid reversal of direction, a different panel of judges for the Fifth Circuit Court of Appeals reinstated the nationwide injunction against enforcement of the Corporate Transparency Act’s Beneficial Ownership Information reporting requirements. As a result, reporting companies are not currently required to submit beneficial ownership information reports to the Financial Crimes Enforcement Network (FinCEN). As of the date of this Alert, FinCEN continues to accept voluntary submission of beneficial ownership information reports.

On December 27, 2024, FinCEN issued an alert regarding the recent Fifth Circuit order. A portion of this alert is reflected below and the entire alert is available here:

IMPACT OF ONGOING LITIGATION – DEADLINE STAY – VOLUNTARY SUBMISSION ONLY

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.

On Tuesday, December 3, 2024, in the case of Texas Top Cop Shop, Inc., et al. v. Garland, et al., No. 4:24-cv-00478 (E.D. Tex.), the U.S. District Court for the Eastern District of Texas, Sherman Division, issued an order granting a nationwide preliminary injunction. Texas Top Cop Shop is only one of several cases that have challenged the Corporate Transparency Act (CTA) pending before courts around the country. Several district courts have denied requests to enjoin the CTA, ruling in favor of the Department of the Treasury. The government continues to believe — consistent with the conclusions of the U.S. District Courts for the Eastern District of Virginia and the District of Oregon — that the CTA is constitutional. For that reason, the Department of Justice, on behalf of the Department of the Treasury, filed a Notice of Appeal on December 5, 2024 and separately sought a stay of the injunction pending that appeal.

On December 23, 2024, a panel of the U.S. Court of Appeals for the Fifth Circuit granted a stay of the district court’s preliminary injunction entered in the case of Texas Top Cop Shop, Inc. v. Garland, pending the outcome of the Department of the Treasury’s ongoing appeal of the district court’s order. FinCEN immediately issued an alert notifying the public of this ruling, and recognizing that reporting companies may have needed additional time to comply with beneficial ownership reporting requirements, FinCEN extended reporting deadlines. On December 26, 2024, however, a different panel of the U.S. Court of Appeals for the Fifth Circuit issued an order vacating the Court’s December 23, 2024 order granting a stay of the preliminary injunction. Accordingly, as of December 26, 2024, the injunction issued by the district court in Texas Top Cop Shop, Inc. v. Garland is in effect and reporting companies are not currently required to file beneficial ownership information with FinCEN.