On December 26, 2024, the United States Court of Appeals for the Fifth Circuit (Fifth Circuit) vacated its December 23, 2024 order which reinstated filing obligations under the Corporate Transparency Act (CTA). The Fifth Circuit’s December 26th order means that companies are not required to comply with the CTA and, therefore, do not need to submit Beneficial Ownership Reports (BOIR). The December 26th order is in place until the 5th Circuit considers the substantive arguments in the Texas Top Cop, Inc. v. Garland case.
How did we get here?
On December 3, 2024, a U.S. District Court in Texas granted a nationwide injunction which prevented the Department of Treasury’s Financial Crimes Enforcement Network (FinCEN) from enforcing the CTA (See, Texas Top Cop Shop, Inc. v. Garland). The injunction meant that companies formed before January 1, 2024 would not be required to file BOIRs before the January 1, 2025 deadline.
The Federal Government filed an appeal of the Texas Top Cop decision, and on December 23, 2024, the Fifth Circuit granted a stay of the injunction, immediately reinstating all CTA reporting requirements. The Fifth Circuit’s ruling allows FinCEN to enforce the CTA, including imposing civil and criminal penalties for failures to file.
As of December 26, 2024, the CTA, including filing deadlines and penalties, is not being enforced, and no company is required to file a BOIR. Although not currently required, FinCEN is still accepting filings for companies that wish to comply with the law on a voluntary basis.
Where things stand
As with the December 3 injunction, the 5th Circuit’s December 26, 2024 order is not a final decision, and it is still possible the CTA reporting requirements could be reinstated, either by the 5th Circuit or another Federal Court. Companies should gather all information that would be necessary to file a BOIR so they can comply if the injunction ends up being lifted.
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