On December 26, 2024, the Fifth Circuit Court of Appeals reinstated the nationwide preliminary injunction blocking enforcement of the Corporate Transparency Act (CTA). This decision was made to "preserve the constitutional status quo while the merits panel considers the parties’ weighty substantive arguments."
On December 27, 2024, the Fifth Circuit issued an expedited briefing schedule for the appeal:
- February 7, 2025 – the Government’s brief is due
- February 21, 2025 – the Plaintiffs’ briefs are due
- February 28, 2025 – the Government’s reply brief is due
- March 25, 2025 – oral argument will take place
FinCEN also released guidance stating that reporting companies are not currently required to file beneficial ownership information and are not subject to liability if they fail to do so while the Order remains in force.
Background
On December 3, 2024, the U.S. District Court for the Eastern District of Texas issued a nationwide preliminary injunction in the case of Texas Top Cop Shop, Inc. et al. vs. V. Merrick Garland. This injunction prohibited the enforcement of the CTA, which requires certain legal entities to file a Beneficial Ownership Information (BOI) report with the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN). The Court found that the CTA and Reporting Rule are likely unconstitutional and stated that “reporting companies need not comply with the CTA’s January 1, 2025, BOI reporting deadline pending further order of the Court.” This ruling applies to all reporting companies under the CTA, not just the plaintiffs in this case.
The Government appealed the District Court’s ruling, and on December 23, 2024, a motions panel of the Fifth Circuit Court of Appeals lifted the temporary injunction. FinCEN then released guidance extending the compliance deadline for reporting companies formed before January 1, 2024, to January 13, 2025. Companies formed on or after January 1, 2024 were still required to file their initial BOI report within 90 days of formation for entities formed in 2024 and within 30 days of formation for entities formed on or after January 1, 2025.
What to Expect
While the December 26, 2024 Order temporarily pauses enforcement of the CTA nationwide, the expedited briefing schedule indicates that a decision on the constitutionality of the CTA, and the potential lifting of the temporary injunction, will not be forthcoming for several months. Additionally, there may be further appeals after the Fifth Circuit’s ruling, other cases challenging the constitutionality of the CTA are currently under appeal, and the new administration may decide to address the CTA and the Reporting Rule. We will continue to closely monitor developments and provide further guidance and updates as necessary.
