On December 26, 2024, the US Court of Appeals for the Fifth Circuit changed course, effectively reinstating the preliminary injunction enjoining enforcement of the Corporate Transparency Act (CTA).1
Background
The CTA requires entities created or registered to do business in the United States to file a report with the Financial Crimes Enforcement Network (FinCEN) with their beneficial ownership information (BOI) unless they are subject to an exemption (Reporting Companies).2 Reporting Companies also must file an updated report within 30 days of any changes to the company’s or beneficial owners’ information.
Prior to the nationwide preliminary injunction, Reporting Companies created or first registered to do business in the United States before January 1, 2024, had until January 1, 2025, to file their initial BOI reports. Those created or first registered to do business in the United States January 1, 2024 – December 31, 2024, and on or after January 1, 2025, had 90 days and 30 days, respectively, to file their initial BOI reports.
Several lawsuits challenging the constitutionality of the CTA’s reporting requirements have been filed, including National Small Business United v. Yellen, in which a federal district court in the Northern District of Alabama concluded that the CTA exceeds the Constitution’s limits on Congress’s power and enjoined enforcement of the CTA against the plaintiffs in that case.3 The US government appealed that order to the Eleventh Circuit where it is still pending.
The federal district court in the Eastern District of Texas (the Texas Federal Court) went one step further in Texas Top Cop Shop, Inc. v. Garland—another case challenging the CTA’s constitutionality—and entered a nationwide preliminary injunction.4 Less than a month before the January 1, 2025, filing deadline that applied to most Reporting Companies and months after certain companies filed their initial reports, the Texas Federal Court granted the preliminary injunction, finding that the CTA was likely unconstitutional and should not be enforced and staying all reporting deadlines.5
FinCEN promptly filed motions to stay the preliminary injunction in Texas Federal Court and the Fifth Circuit, pending an appeal on the merits to the Fifth Circuit.6 On December 23, 2024, a motions panel of the Fifth Circuit granted the government’s emergency motion for a stay of the preliminary injunction pending the appeal and reinstated the CTA’s reporting deadlines. Recognizing that Reporting Companies could need additional time to comply with the reporting requirements, FinCEN extended the deadlines. For example, the deadline for entities created or first registered to do business in the United States to file their initial reports was extended from January 1, 2025, to January 13, 2025.
However, just three days later the Fifth Circuit merits panel that will decide the appeal vacated the motions panel’s order granting the Government’s motion to stay the preliminary injunction “in order to preserve the constitutional status quo while the merits panel considers the parties’ weighty substantive arguments.”7 The Fifth Circuit ordered an expedited briefing schedule requiring the matter to be fully briefed by February 28, 2025, and scheduled oral argument for March 25, 2025.8
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1 Corporate Transparency Act, 31 U.S.C. 5336, and its implementing regulations.
2 Please see our other alerts for additional information about the CTA’s BOI reporting requirements.
3 National Small Business United v. Yellen, No. 5:22-cv-01448 (N.D. Ala.).
4 FinCEN fights back after Texas Federal Court blocks the CTA (Dec. 16, 2024).
5 Dkt. 30, Texas Top Cop Shop, Inc. v. Garland, No. 4:24-CV-478, 2024 WL 4953814 (E.D. Tex. Dec. 3, 2024).
6 Dkt. 21, Texas Top Cop Shop, Inc. v. Garland, No. 24-40792 (5th Cir. Dec. 13, 2024).
7 Dkt. 160-2, Texas Top Cop Shop, Inc. v. Garland, No. 24-40792 (5th Cir. Dec. 13, 2024).
8 Dkts. 163, 165, Texas Top Cop Shop, Inc. v. Garland, No. 24-40792 (5th Cir. Dec. 13, 2024).
9 FinCEN Beneficial Ownership Information landing page (last accessed Dec. 27, 2024).
10 H.R. 8147: Repealing Big Brother Overreach Act; US S4297: Repealing Big Brother Overreach Act.
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