12.30.24 –Brienne Marco Spilman Thomas & Battle, PLLC
If you are feeling a bit of whiplash today, you are not alone. The United States Court of Appeals for the Fifth Circuit has reinstated a preliminary nationwide injunction of the Corporate Transparency Act (“CTA”).
Let’s recap how we got here. The CTA, enacted on January 1, 2021, requires most business entities to file a Beneficial Ownership Information (“BOI”) report to the U.S. Treasury’s Financial Crimes Enforcement Network (“FinCEN”), unless the entity is exempt from reporting under one of the CTA’s exemptions. The CTA imposed deadlines on companies to file their BOI reports, with a significant deadline for many companies being January 1, 2025.
On December 3, 2024, the United States District Court for the Eastern District of Texas issued a preliminary injunction prohibiting the enforcement of the CTA. The District Court’s decision was appealed to the Fifth Circuit Court of Appeals, and on December 23, 2024, a motions panel of the Appeals Court granted a stay of the injunction, causing the preliminary injunction to be lifted and the deadlines reinstated. In the order granting the stay, the motions panel ordered that the appeal be expedited to the next available argument panel (also called the merits panel). On December 23, 2024, following the motions panel’s decision, FinCEN extended some of the filing deadlines to account for the period during which the preliminary injunction was in effect.
On December 26, 2024, the merits panel vacated a portion of the decision of the motions panel “to preserve the constitutional status quo while the merits panel considers the parties’ weighty substantive arguments.” This means the preliminary injunction has been reinstated pending resolution of the appeal. The appeal is now pending with the merits panel, and the appeal remains expedited with a briefing schedule to follow.
While the preliminary injunction remains in effect, FinCEN cannot enforce the CTA and its reporting deadlines. Businesses that already filed an initial BOI report need not file any additional reports, including any amended or updated reports, until a final resolution is reached in the matter. Businesses that have not yet filed an initial BOI report should monitor for further updates and be prepared to file a report quickly should the injunction be ultimately lifted by the Fifth Circuit Court of Appeals or overturned on appeal to the United States Supreme Court.