UPDATE : 5th Circuit Reinstates Injunction Pausing Enforcement of the Corporate Transparency Act

Update from December 26, 2024: The 5th Circuit has vacated its earlier decision lifting a nationwide injunction on the enforcement of the Corporate Transparency Act ("CTA"). Consequently, the injunction on enforcement of the CTA is now again in effect and filing obligations are temporarily paused.

On December 26, 2024, the 5th Circuit vacated its earlier decision from December 23, 2024, lifting a U.S. District Court's nationwide injunction on enforcement of the CTA.

The "merits panel" of judges that vacated the 5th Circuit's prior decision is comprised of a different group of judges than those that make up the "motions panel" that initially lifted the injunction.

FinCEN has since confirmed that it will again comply with the injunction and that filing obligations are temporarily paused while the injunction remains in effect. FinCEN has stated that reporting companies may voluntarily continue to file their beneficial ownership reports. See FinCEN's website for additional details and current information.

The 5th Circuit has scheduled oral arguments on the merits of the District Court's injunction for March 25, 2025. There are numerous challenges to the CTA both within Congress and across various federal courts, and reporting companies should continue to monitor for updates regarding their potential obligations under the CTA.

For additional information regarding the CTA and the recently vacated 5th Circuit decision, please see our initial advisory below.

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Initial Client Advisory Regarding 5th Circuit Decision Staying Injunction of CTA Enforcement

After a preliminary injunction temporarily halted the enforcement of the Corporate Transparency Act ahead of its January 1, 2025, reporting deadline for companies formed prior to 2024, the 5th Circuit has lifted the injunction. FinCEN published a statement following the 5th Circuit's order, granting certain reporting companies additional time to comply with reporting obligations (see further information below).

On December 23, 2024, the U.S. Court of Appeals for the 5th Circuit granted a motion for a temporary stay of the injunction pending appeal. The 5th Circuit found that the government had met its burden of proof and had demonstrated that a stay was warranted.

Background

The CTA took effect on January 1, 2024, requiring reporting companies file beneficial ownership information with the U.S. Department of Treasury's Financial Crimes Enforcement Network (FinCEN). The law was enacted to increase ownership transparency for the government's aims of preventing money laundering and combatting financial crimes.

Among other things, the CTA requires that companies in existence as of January 1, 2024, submit beneficial ownership information reports to FinCEN by the deadline of January 1, 2025.

5th Circuit Decision Lifting Injunction

In Texas Top Cop Shop, Inc., et al. v. Merrick Garland, Attorney General of the United States, et al., six plaintiffs challenged the constitutionality of the Corporate Transparency Act (CTA) under the First and Fourth Amendments of the U.S. Constitution. The U.S. District Court for the Eastern District of Texas ruled in favor of the plaintiffs, issuing a preliminary injunction to block the enforcement of the CTA nationwide. The decision temporarily stopped the filing obligations of an estimated 32.6 million existing reporting companies.

The ruling by the 5th Circuit on December 23, 2024, lifted the injunction, which means reporting companies are required once again to file their beneficial ownership information with FinCEN.

Impact on Reporting Companies' Filing Obligations

Following the 5th Circuit decision, FinCEN extended several reporting deadlines under the CTA, including those for reporting companies formed prior to 2024, which now have until January 13, 2025, to file their beneficial ownership information reports with FinCEN. For a full list of the CTA filing deadlines extended by FinCEN, please visit FinCEN's website here.

The court's stay does not represent a final decision regarding the CTA or its reporting requirements. The 5th Circuit ordered that the appeal of the case is to be expedited to the next available oral argument panel.