Key Takeaways
- On Jan. 23, the Supreme Court granted the U.S. government’s application to immediately stay a nationwide injunction against the Corporate Transparency Act (CTA) issued by a federal district court in Texas on Dec. 3, 2024. As a result, that nationwide injunction will no longer be in effect as the merits of that case are heard on appeal by the Fifth Circuit Court of Appeals.
- However, on Jan. 7, a different district court judge in Texas had issued a nationwide stay of the effective date of the final rule establishing the CTA’s reporting requirements and deadlines (the Reporting Rule) while this new case moves forward. The government has not yet filed an appeal of this decision.
- On Jan. 24, the Financial Crimes Enforcement Network (FinCEN) issued a public statement confirming that, despite its recent Supreme Court victory, there continues to be no obligation to comply with the CTA while the new district court order remains in effect.
Supreme Court Stays Nationwide CTA Injunction
On Jan. 23, the Supreme Court granted the U.S. government’s application to immediately stay the nationwide CTA injunction issued last month by a federal district court in the Eastern District of Texas. See Texas Top Cop Shop, Inc. v. McHenry (formerly Texas Top Cop Shop, Inc. v. Garland), No. 4:24-cv-00478 (E.D. Tex. Dec. 3, 2024).
The Court did not offer its reasoning behind the decision to grant the stay. Justice Neil Gorsuch issued a concurring opinion, adding that he would have gone a step further to use this case as an opportunity to resolve questions regarding the extent to which a district court may issue nationwide injunctive relief.
Justice Ketanji Brown Jackson authored a dissenting opinion, reasoning that emergency relief in favor of FinCEN was not appropriate in this case because the government failed to justify the immediate harms it would face by letting an expedited appeal proceed after it deferred implementation of the CTA by nearly four years after Congress enacted the law.
As a result of the Supreme Court’s decision, the nationwide injunction issued last month in Texas Top Cop Shop will no longer be in effect as the merits of that case are heard on appeal by the Fifth Circuit Court of Appeals. According to the published schedule for that case, briefing is scheduled to conclude by Feb. 28 and oral arguments are scheduled to take place on March 25.
New District Court Decision Separately Blocks the CTA
While the Supreme Court review was still pending, a different federal judge in the Eastern District of Texas issued a separate preliminary injunction against the CTA and stay of the Reporting Rule after finding that the CTA was likely unconstitutional. See Smith v. U.S. Department of Treasury, No. 6:24-cv-336-JDK (E.D. Tex. Jan. 7, 2025).
Unlike Texas Top Cop Shop, the injunction issued in this decision applies only to the named plaintiffs. However, the district court issued a broader stay of the effective date of the Reporting Rule pursuant to Section 705 of the Administrative Procedure Act. According to the court’s reasoning, this stay serves to temporarily invalidate the Reporting Rule for all affected parties — not just the named plaintiffs — while Smith is pending.
FinCEN Confirms the CTA Remains on Hold
On Jan. 24, FinCEN issued a public statement confirming that, despite the Supreme Court’s recent decision in Texas Top Cop Shop, there continues to be no obligation to comply with the CTA while the nationwide order in Smith remains in place. The notice also confirmed that voluntary filings are still permitted.
Here is FinCEN’s full statement on the impact of these decisions:
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 January 23, 2025, 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.
Interestingly, the U.S. government has yet to file an appeal of the decision in Smith. With the recent transition to a new administration, it is unclear if the government will adopt a different approach in deciding whether and how to pursue appeals of court decisions that block or limit the CTA.
We will continue to provide updates regarding further material developments as they arise.
