The Corporate Transparency Act: Holiday Surprises, Injunction Reinstated
As of December 27, 2024, reporting requirements under the Corporate Transparency Act (CTA) are once again paused after a panel of the U.S. Court of Appeals for the Fifth Circuit issued an order vacating the December 23, 2024, order granting a stay of the preliminary injunction.
The past week has been tumultuous for thousands of small businesses following the status of Texas Top Cop Shop, Inc., et al. v. Garland, et al., No. 4:24-cv-00478 (E.D. Tex.) to determine whether they will be required to file their beneficial ownership information as required by the CTA. For anyone not actively following the judicial developments, below is a timeline of the pertinent decisions this past month.
Tuesday, December 3, 2024
The U.S. District Court for the Eastern District of Texas, Sherman Division, issued an order instituting a nationwide injunction for the beneficial ownership reporting requirements under the CTA.
Thursday, December 5, 2024
The Department of Justice, acting on behalf of the Department of the Treasury, filed a Notice of Appeal and sought a stay of the injunction pending the appeal.
Monday, 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 on December 3rd. This stay meant that businesses were once again required to file beneficial ownership reports with Financial Crimes Enforcement Network (FinCEN) under a modified deadline scheme issued after the stay was entered by the Court.
Thursday, December 26, 2024
A different panel of the U.S. Court of Appeals for the Fifth Circuit issued an order vacating the Courts December 23rd order leading to the December 3rd injunction going back into effect.
The official FinCEN website posted an announcement on Friday December 27, 2024, recognizing that the reporting requirements are once again paused while this case continues to work itself through the court system.
The fate of these reporting requirements is up in the air now, leaving businesses uncertain as to whether they should wait to file their reports or if they will have to file them at all. At the same time, the penalties for failing to comply with the CTA are harsh and businesses may not want to risk missing a last-minute deadline if the injunction is once again stayed.
Thus far, FinCEN has been quick to address developments in the case as they happen and recognized the uncertainty that the case has caused among reporting companies. If FinCEN’s actions this week are a guide for what we can expect going forward, it is likely that if the injunction is stayed again as it was on December 23rd, FinCEN will once again modify the reporting deadlines beyond January 1, 2025.
For more information or to monitor the status of the reporting requirements, visit FinCEN’s website at www.fincen.gov/boi.
