Corporate Transparency Act Update

Fifth Circuit Reinstates Injunction of the Corporate Transparency Act: What Businesses Need to Know

The legal landscape surrounding the Corporate Transparency Act (CTA) has shifted yet again. A nationwide injunction against its enforcement, along with a related implementing rule, has been reinstated, providing temporary relief for reporting companies. Here’s what you need to know:

Key Updates:

1. Nationwide Injunction in Place Reporting companies are currently not required to report beneficial ownership information (BOI) to the Financial Crimes Enforcement Network (FinCEN). This injunction halts enforcement of the CTA, offering a temporary reprieve.

2. DOJ’s Supreme Court Petition On December 31, 2024, the Department of Justice (DOJ) filed an application with the U.S. Supreme Court to stay the nationwide injunction. The DOJ has also requested that, if the injunction is upheld, it be narrowed to the named plaintiffs and National Federation of Independent Business (NFIB) members identified in the original complaint.

3. Supreme Court’s Potential Role The Supreme Court may decide to stay or narrow the injunction. If this happens, reporting companies may need to quickly comply with BOI reporting requirements. Businesses should remain prepared for possible changes.

4. Timelines for Resolution The Fifth Circuit will hear oral arguments on the DOJ’s appeal on March 25, 2025. Until then, the nationwide injunction remains in effect unless the Supreme Court intervenes.

Background

The Corporate Transparency Act aims to enhance transparency by requiring certain entities to disclose beneficial ownership information to FinCEN. However, legal challenges have created a turbulent regulatory environment:

  • December 3, 2024: A U.S. District Court issued an injunction halting the enforcement of the CTA and its implementing rule.
  • December 13, 2024: The DOJ appealed, seeking an emergency stay of the injunction.
  • December 23, 2024: The Fifth Circuit granted the DOJ’s request, reinstating the BOI reporting requirements.
  • December 26, 2024: A separate Fifth Circuit panel reversed the stay, reinstating the nationwide injunction.

FinCEN’s Adjustments

In response to these legal developments, FinCEN extended BOI reporting deadlines:

  • Reporting companies existing before 2024 now have until January 13, 2025 to report.
  • Companies created or registered between December 3, 2024, and December 23, 2024, have 21 additional days from their original deadlines.

FinCEN continues to accept BOI reports voluntarily but emphasizes that companies are not currently required to file.

DOJ’s Supreme Court Filing

The DOJ’s emergency application to the Supreme Court raises key questions:

  • Should the nationwide injunction be stayed during the Fifth Circuit’s review?
  • Did the district court overreach by issuing universal relief through a nationwide injunction?

The Supreme Court has asked plaintiffs to respond by January 10, 2025, signaling potential action in the near term.

Implications for Businesses

While the injunction remains in effect, companies should:

  • Stay informed about developments in the Fifth Circuit and Supreme Court.
  • Prepare to comply with BOI reporting requirements if the injunction is lifted or narrowed.
  • Monitor updates from FinCEN regarding deadlines and enforcement.

The regulatory environment is fluid, and businesses must remain adaptable. Contradictory rulings from appellate courts could further increase the likelihood of Supreme Court intervention, potentially altering compliance timelines.

Next Steps

BOI Agent will continue to track these developments and provide timely updates. Businesses are encouraged to consult legal counsel to ensure readiness for any changes in reporting obligations.

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