Updates Regarding the Corporate Transparency Act Hold: Key Implications for Businesses

Frank J. Portera • February 13, 2025


BACKGROUND


On December 11, 2024, we published an article titled “Corporate Transparency Act on Hold: Key Implications for Businesses,” which addressed the nationwide injunction impacting the enforcement of the Corporate Transparency Act (“CTA”) and its Beneficial Ownership Information Reporting (“BOIR”) rule.


Since then, there have been a few significant legal developments that businesses should monitor closely. While the Financial Crimes Enforcement Network (“FinCEN”) is currently prohibited from enforcing BOIR requirements, ongoing litigation, and the related appeals may alter this status. Below, we provide a timeline of key events and insights into what business owners should anticipate moving forward.


KEY LEGAL DEVELOPMENTS


  • December 3, 2024: The U.S. District Court for the Eastern District of Texas issued a nationwide injunction, blocking the enforcement of the CTA. Texas Top Cop Shop, Inc., et al. v. McHenry, et al., No. 4:24-cv-00478 (E.D. Tex.) (formerly Texas Top Cop Shop, Inc., et al. v. Garland, et al.).
  • Impact: This ruling suspended BOIR compliance obligations for Reporting Companies under the CTA.
  • December 23, 2024: The Motions Panel of the U.S. Court of Appeals for the Fifth Circuit granted a stay of the District Court’s December 3, 2024 injunction.
  • Impact: This stay reinstated the BOIR obligations, requiring Reporting Companies to comply with the CTA before a new January 13, 2025 deadline.
  • December 26, 2024: The Merits Panel of the Fifth Circuit vacated the December 23, 2024 stay issued by the motions panel.
  • Impact: The District Court’s December 3, 2024 injunction was reinstated, again suspending BOIR requirements indefinitely.
  • December 31, 2024: The United States Department of Justice filed an application for stay with the U.S. Supreme Court requesting the December 3, 2024, injunction be stayed or narrowed pending proceedings in the Fifth Circuit.
  • Impact: This set the stage for further judicial review and potential changes in compliance obligations.
  • January 7, 2025: The U.S. District Court for the Northern District of Texas issued a second nationwide injunction enjoining the enforcement of the CTA. Smith v. Dept. of the Treasury, E.D. Tex., No. 6:24-cv-00336.
  • Impact: This ruling further reinforced the suspension of BOIR compliance requirements.
  • January 23, 2025: The U.S. Supreme Court granted a stay on the December 3, 2024, injunction (Top Cop Shop) pending the appeals process.
  • Impact: While this lifted the first injunction, it did not affect the second nationwide injunction issued on January 7, 2025, and FinCEN is still prohibited from enforcing the BOIR requirements.


FUTURE OUTLOOK


On January 24, 2025, FinCEN issued an advisory report confirming that BOIR obligations remain suspended due to the January 7, 2025 injunction. However, given the United States Supreme Court’s intervention in the December 3, 2024 injunction, Reporting Companies should be prepared for the possibility of a similar ruling affecting the Smith injunction issued on January 7, 2025. If this occurs, compliance obligations could resume swiftly.


RECOMMENDATIONS


Prepare for Potential Compliance: If the current injunction is lifted, businesses may need to act quickly to meet reporting deadlines. Establishing compliance mechanisms in advance and gathering required information can help mitigate risks.


Consider Voluntary Compliance: While not mandatory at this time, businesses may opt to voluntarily follow BOIR obligations to avoid last-minute compliance challenges should the legal landscape shift.


Monitor Ongoing Legal Developments: Given the rapid changes in CTA enforcement, staying informed is crucial. Businesses should consult legal counsel to navigate compliance requirements effectively.


For further inquiries or questions, please contact Attorney Frank J. Portera at fportera@lavellelaw.com or (847) 705-7555.

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