NEW UPDATE Regarding the Corporate Transparency Act

By Michael High, Brittany Michaud, and Andrew Sweeney

December 27, 2024

The Saga Continues: Fifth Circuit Vacates Stay of Preliminary Injunction

If you have been following the saga through our previous client alerts, you know that on December 3, 2024 a United States district court in the Eastern District of Texas preliminarily enjoined the enforcement of the Corporate Transparency Act (CTA) in its entirety nationwide and also specifically stayed the reporting deadline of January 1, 2025 for reporting companies formed or registered to do business in the U.S. before January 1, 2024.[1] The ruling temporarily prohibited the Financial Crimes Enforcement Network (FinCEN) from enforcing the CTA, pending resolution of the lawsuit. The DOJ filed a notice of appeal on December 5, 2024 and requested that the preliminary injunction be stayed pending appeal. On December 23, 2024, the Fifth Circuit stayed the preliminary injunction. FinCEN then extended the filing deadlines for some reporting companies to January 13, 2025.

On December 26, the Fifth Circuit vacated their own stay of the District Court’s preliminary injunction of the enforcement of the January 1, 2025 deadline for reporting compliance under the CTA. FinCEN issued the following statement on December 27, 2024:

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.

We will continue to monitor developments relating to this case and its impact on your reporting obligations. While we understand that clients may choose to pause filings in light of the ongoing litigation, we once again recommend that clients do not abandon preparations for eventual compliance and to be prepared to file on short notice if the preliminary injunction is again stayed or overturned, resulting in the January 13, 2025 deadline for some entities being reinstated or a new deadline being imposed on short notice.

Note that even while the injunction remains in place, reporting companies are not precluded from filing with FinCEN if they choose to avoid future uncertainty.

If you have any questions, please contact your principal at Drummond Woodsum and more generally you may want to consult our prior alerts which can be found at: Corporate Transparency Act Requirements Reinstated; UPDATE on the Corporate Transparency Act – Drummond Woodsum; The CTA: Time is Running Out – Drummond Woodsum; Get Ready for the Corporate Transparency Act – Drummond Woodsum.

[1] See Texas Top Cop Shop, Inc. v. Garland, No. 4:24-cv-478 (E.D. Tex.).