On Jan. 23, the U.S. Supreme Court stayed the Dec. 5 nationwide injunction in Texas Top Cop Shop, Inc. v. Garland (E.D. Tex.) that had halted Corporate Transparency Act (“CTA”) enforcement nationwide. The stay of this injunction will remain in place pending the Fifth Circuit’s decision on the government’s appeal, with oral argument scheduled for March 25. With the Trump administration taking control of the CTA litigation, there is a great deal of uncertainty on how the government will proceed with this appeal.
A separate Jan. 7 injunction in Smith v. U.S. Department of Treasury presents additional uncertainty. While this injunction only bars CTA enforcement against the case’s parties, it also purports to stay the effective date of the CTA’s Beneficial Ownership Information Reporting Rule more broadly.
FinCEN responded to the recent developments by issuing an update that maintains that reporting is voluntary while the litigation and appeals play out:
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.
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On Jan. 23, the Supreme Court granted the government’s motion to stay a nationwide injunction issued by a federal judge in Texas (Texas Top Cop Shop, Inc. v. McHenry—formerly, Texas Top Cop Shop v. Garland). As a separate nationwide order issued by a different federal judge in Texas (Smith v. U.S. Department of the Treasury) still remains in place, reporting companies are not currently required to file beneficial ownership information with FinCEN despite the Supreme Court’s action in Texas Top Cop Shop. Reporting companies also are not subject to liability if they fail to file this information while the Smith order remains in force. However, reporting companies may continue to voluntarily submit beneficial ownership information reports.
The injunction does not prohibit companies from filing BOI reports and the FinCEN website is still accepting filings. Due to the evolving nature of the CTA litigation and ongoing uncertainty, some companies are electing to proceed with submitting BOI report filings while others are taking a wait-and-see approach.
