The Bottom Line
- The Supreme Court stayed one injunction that prohibited the government from enforcing the CTA.
- Due to a second nationwide injunction that was not addressed by the Supreme Court, FinCEN announced that it is still unable to enforce the CTA and that reporting companies are still not required to file beneficial ownership information reports until further notice.
- Businesses need to stay informed about the ongoing litigation and be ready for possible changes that could affect their compliance obligations under the CTA.
In a significant development for the Corporate Transparency Act (CTA), the U.S. Supreme Court has stayed one nationwide injunction, while a second nationwide injunction remains in effect, further complicating the legal landscape for businesses.
Timeline: Prior CTA Developments
- December 3, 2024: Judge Amos Mazzant of the United States District Court for the Eastern District of Texas issued a nationwide preliminary injunction halting the enforceability of the CTA and its implementing regulations.
- December 23, 2024: A motions panel of the United States Court of Appeals for the Fifth Circuit stayed the District Court’s injunction, which effectively reinstated the beneficial ownership reporting requirement under the CTA. The same day, the U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN) extended the applicable filing deadlines.
- December 26, 2024: The Fifth Circuit vacated the motion panel’s order staying the injunction pending its consideration of the constitutionality of the CTA. In issuing its order, the Fifth Circuit noted its desire to maintain the “constitutional status quo” while the proceedings advance. In connection with the ruling, the court issued an expedited schedule for a hearing on the merits, but oral arguments are not scheduled until the end of March 2025.
New Development: Second Nationwide Injunction Granted
On January 7, 2025, Judge Jeremy Kernodle of the United States District Court for the Eastern District of Texas heard a second case on the constitutionality of the CTA and issued a separate nationwide preliminary injunction, halting the enforceability of the CTA on different grounds than those relied on by Judge Mazzant.
New Development: Supreme Court Issues Stay
On January 23, 2025, the Supreme Court stayed the injunction issued by Judge Mazzant pending the disposition of the applicable appeal by the Fifth Circuit. With this action, absent the second injunction, the government would again be permitted to enforce the CTA (and require reporting companies to file beneficial ownership information reports (BOI Reports)). The Supreme Court did not address the injunction against the CTA’s reporting rule that was issued by Judge Kernodle.
On Hold: Requirement to File Beneficial Ownership Information Report
As a result of the procedural actions described above, a nationwide injunction remains in place. Accordingly, FinCEN updated the BOI webpage to reflect the status of the two ongoing lawsuits and clarify that reporting companies are still not required to file BOI reports. The announcement states further that reporting companies will not be subject to liability if they do not file BOI Reports while the injunction remains in place, but they may continue to voluntarily file.
Recommendation: Stay Prepared
With the pending review of Judge Mazzant’s ruling by the Fifth Circuit Court of Appeals, additional developments are ahead. The Fifth Circuit and/or Supreme Court may also review the second injunction approved by Judge Kernodle, though as of the time of publication, the government had not sought such review. At this time, reporting companies should continue to collect and maintain their beneficial ownership information in the event the CTA, yet again, goes back into effect on a short timeline.
Davis+Gilbert continues to monitor developments on all fronts as these cases (and others) work their way through the courts.