Enforcement of the Corporate Transparency Act (the “CTA”) has again been halted. On December 26, 2024, the United States Court of Appeals for the Fifth Circuit vacated its own stay order entered three days earlier. The most recent order reinstates the nationwide preliminary injunction entered by the district court, once again effectively halting enforcement of the CTA while the appeal of Texas Top Cop Shop, Inc. et al. v. Garland et al., Case No. 4:24-cv-478 (E.D. Tex.) continues.
To provide clarity regarding the recent fluctuating status of the enforceability of the CTA, below is a summary of the progression of this case:
- December 3, 2024 – The United States District Court for the Eastern District of Texas granted a nationwide preliminary injunction enjoining the government from enforcing the CTA and its implementing regulations, which the U.S. government promptly appealed.
- December 23, 2024 – A motions panel of the Fifth Circuit Court of Appeals granted the government’s appeal and lifted the nationwide injunction. Following the ruling, the Financial Crimes Enforcement Network (“FinCEN”) extended the deadlines to file initial beneficial ownership information reports by issuing an alert.
- December 26, 2024 – A merits panel of the Fifth Circuit Court of Appeals vacated the motions panel’s December 23rd order, resulting in the reinstatement of the injunction.
The oral argument of the appeal is currently set for March 25, 2025, however, we do not know when the Fifth Circuit Court of Appeals will enter its order following oral arguments.
As before, while the preliminary injunction is in place, reporting companies will not be subject to enforcement of the CTA. However, as demonstrated by this past week’s events, the enforceability of the CTA is subject to continued uncertainty as various constitutional challenges to the CTA continue to make their way through the judicial system.
Though enforcement of the CTA is currently halted, entities that are subject to the CTA’s reporting requirements may still voluntarily submit their beneficial ownership information to FinCEN while this case continues through the appellate process. Entities that elect to wait to file their beneficial ownership information until further decisions are reached may benefit from collecting any information that is necessary for their initial reports under the CTA, so that they are prepared to file if the reporting requirements are reinstated.
We will continue to monitor the progress of this case and other challenges to the CTA.
