The Fifth Circuit Court of Appeals hit pause again on the reporting requirements of the Corporate Transparency Act (CTA), continuing a recent series of baffling legal developments.
Specifically, on December 26, 2024, the Fifth Circuit reinstated the nationwide preliminary injunction enjoining enforcement of the CTA and its regulations. As a result, no beneficial ownership reporting under the CTA is required by law, which the Financial Crimes Enforcement Network (FinCEN) confirmed on December 27, 2024. Instead, filing is once again voluntary.
To summarize earlier legal developments:
- On December 3, 2024, a District Court in Texas issued a nationwide preliminary injunction against enforcement of the CTA in Texas Top Cop Shop, Inc. et al. v. Garland et al., pausing CTA reporting requirements and making filings voluntary.
- On December 5, 2024, the government filed a Notice of Appeal.
- On December 23, 2024, the Fifth Circuit issued a stay pending appeal of the preliminary injunction, putting the CTA requirements back into effect.
- Following the Fifth Circuit’s stay, FinCEN extended certain reporting deadlines, including a deadline of January 13, 2025, for reporting companies in existence prior to 2024.
Although the CTA’s reporting obligations are not currently in effect today, it is clear from the rapidly evolving Texas Top Cop Shop litigation that the path forward for CTA compliance continues to be unpredictable, as the CTA implicates important constitutional issues. The Fifth Circuit’s expedited briefing schedule gives the Texas Top Cop Shop parties throughout February of 2025 to file briefs, with oral arguments scheduled for March 25, 2025. During this timeframe, the government has the option to seek further emergency relief from the Fifth Circuit or the U.S. Supreme Court, and Congress or the executive branch could also take steps next year while the appeal progresses that could impact the CTA.
In light of all this uncertainty, reporting companies may again delay filing, but it is imperative to carefully monitor these fast-moving legal developments. It is clear that FinCEN will continue to push for filings to be made, so reporting companies need to be prepared to act quickly to file reports if the injunction is once again lifted.
For more information contact CTA@kjk.com.