BREAKING NEWS: It's Déjà Vu All Over Again - Corporate Transparency Act Nationwide Injunction is Reinstated

Okay, let’s follow the bouncing the ball. On December 3, 2024, the U.S. District Court for the Eastern District of Texas/Sherman Division entered an order enjoining the enforcement of the Corporate Transparency Act (CTA) and its corresponding Reporting Rule. The Government requested a stay of the preliminary injunction, which the District Court denied. The Government appealed, and on December 23, 2024, a motions panel of the Fifth Circuit Court of Appeals granted the Government’s emergency motion for a stay pending appeal, which lifted the injunction and reinstated the CTA and the Reporting Rule. The Financial Crimes Enforcement Network of the Department of Treasury (FinCEN) then extended some of the filing deadlines as we reported in our prior alert.

The motions panel also ordered an expedited appeal on the merits of the case. The merits panel now has the appeal, which remains expedited, and a briefing schedule will be forthcoming. However, to preserve the constitutional status quo while the merits panel considers the parties’ weighty substantive arguments, the merits panel of the Fifth Circuit has vacated the part of the motions-panel order granting the Government’s motion to stay the district court’s preliminary injunction enjoining enforcement of the CTA and the Reporting Rule. That means the nationwide preliminary injunction is back in place. While it is, FinCEN cannot enforce the CTA, and reporting companies are not required to file their beneficial ownership information reports.  Since the Fifth Circuit has not yet issued the briefing schedule, we do not know how long the injunction will be in place or whether the Government will appeal the matter to the U.S. Supreme Court in the meanwhile. We will continue to monitor developments.

Court Scheduling Update:

The Fifth Circuit Court of Appeals has set March 25, 2025 as the date for oral argument on the merits of the case (Texas Top Cop Shop, Inc., et al. v. Merrick Garland, Attorney General of the United States, et al.), with a briefing schedule back and forth between the parties throughout February 2025.  Barring an appeal to the U.S. Supreme Court or some further en banc rehearing by the entire Fifth Circuit, this schedule would seem to give reporting companies a little breathing room. That said, developments have been fast-moving over the last few weeks, so it is hard to feel certain about anything related to this case.

FinCEN has acknowledged the latest development of the nationwide preliminary injunction being reinstated by posting an alert on its website noting the developments and indicating that 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 court order remains in force. However, reporting companies may continue to voluntarily submit beneficial ownership information reports.