On January 23, 2025, the U.S. Supreme Court issued an order in McHenry v. Texas Top Cop Shop, Inc.[1] and granted a stay of the preliminary injunction issued by the federal district court, thereby eliminating that injunction’s impediment to enforcement of the reporting requirements of the Corporate Transparency Act (“CTA”) by the Financial Crimes Enforcement Network (“FinCEN”) while the litigation as to the CTA’s constitutionality proceeds.[2]
The Court’s order reads thus:
[A]pplication [No. 24A653] for stay presented to Justice Alito and by him referred to the Court is granted. The December 5, 2024 amended order of the United States District Court for the Eastern District of Texas, case No. 4:24-cv-478, is stayed pending the disposition of the appeal in the United States Court of Appeals for the Fifth Circuit and disposition of a petition for a writ of certiorari, if such a writ is timely sought. Should certiorari be denied, this stay shall terminate automatically.[3]
In his concurring opinion, Justice Gorsuch wrote, “I agree with the Court that the government is entitled to a stay of the district court’s universal injunction. I would, however, go a step further and, as the government suggests, take this case now to resolve definitively the question whether a district court may issue universal injunctive relief.”[4] Justice Jackson, dissenting from the granting of the stay, wrote:
However likely the Government’s success on the merits may be, in my view, emergency relief is not appropriate because the applicant has failed to demonstrate sufficient exigency to justify our intervention. I see no need for this Court to step in now for at least two reasons. First, the Fifth Circuit has expedited its consideration of the Government’s appeal. Second, the Government deferred implementation on its own accord—setting an enforcement date of nearly four years after Congress enacted the law—despite the fact that the harms it now says warrant our involvement were likely to occur during that period. The Government has provided no indication that injury of a more serious or significant nature would result if the Act’s implementation is further delayed while the litigation proceeds in the lower courts. I would therefore deny the application and permit the appellate process to run its course.[5]
However, while the application for stay to the Supreme Court was pending, a second decision in the same federal district court was issued—and in that case, Smith v. Department of the Treasury,[6] a different injunction was imposed. That case is discussed below, but as of this writing, and notwithstanding certain published reports to the contrary,[7] enforcement of the CTA’s Reporting Rules[8] continues to be stayed by the separate preliminary injunction issued in Smith.[9] At this juncture, that is about all we know, which means that there remains significant uncertainty.
Breaking Down the Ruling—or What Happens Next?
It is not entirely clear on what basis the Supreme Court reinstated the CTA (i.e., stayed the preliminary injunction against it): a general dislike of nationwide preliminary injunctions, a belief that the standards for the issuance of a nationwide injunction had not been satisfied, or something else. All of the following prognostication needs to be understood to be just that—a thought experiment as to where matters could proceed without any affirmative suggestion that they will do so:
- Presumably, the Texas Top Cop Shop (“TTCS”) case, now being heard on an expedited basis,[10] will be returned to the Fifth Circuit for a decision on the merits as to the CTA’s constitutionality vis-à-vis the Commerce Clause; but in the meantime, viewed within the scope of the TTCS litigation,[11] the CTA remains in effect.
- If the government prevails at the Fifth Circuit, the stay of the district court’s preliminary injunction will remain in force pending a decision on any petition for certiorari filed by (presumably) the plaintiffs.
- If the plaintiffs prevail at the Fifth Circuit, the stay of the district court’s preliminary injunction will remain in force pending a decision on any petition for certiorari filed by (presumably) the government.[12]
- If the Supreme Court is unwilling to grant certiorari to either party dissatisfied with the decision of the Fifth Circuit, then the Supreme Court’s stay of the TTCS preliminary injunction will “terminate automatically.”
- If the Supreme Court grants certiorari to either party dissatisfied with the decision of the Fifth Circuit, then the Supreme Court’s stay of the TTCS preliminary injunction will remain in effect until the Supreme Court rules.
Smith v. U.S. Department of the Treasury: Preliminary Injunction
In the Smith case, pending in the same Texas federal district court as TTCS but before a different judge,[13] the court on January 7, 2025, issued a preliminary injunction with two components.[14] First, as to the named plaintiffs—just two individuals—enforcement of the CTA was enjoined. Second, on a nationwide basis, the Reporting Rules[15] were enjoined. For purposes of this discussion, keep in mind that all of the reporting deadlines under the CTA, as well as the required contents of a beneficial ownership information report (“BOIR”), are provided for in the Reporting Rules.
Notwithstanding that it was mentioned in the government’s reply brief to the Supreme Court in TTCS,[16] this suit was not referenced in the Supreme Court’s order imposing the stay of the injunction. Ordinarily, one might suspect that the preliminary injunction in the Smith case would meet the same fate in the Supreme Court or possibly the Fifth Circuit as did the Texas Top Cop Shop case. These are not ordinary times.
First, the government would need either to appeal the injunction from the district court to the Fifth Circuit on an emergency basis, or to ask the district court by motion to lift the injunction given the stay in TTCS.[17] It is also possible that the Smith judge could act sua sponte. Another alternative would be to appeal and request that the appeal in Smith be consolidated with the already scheduled argument of TTCS. No doubt there are other paths. However, as of noon (EST) on February 2, 2025, no notice of appeal or motion to stay or lift the preliminary injunction has been filed in the Smith case. Even assuming that the government decides to continue to defend the CTA, it is entirely possible that it will allow the status quo ante[18] to continue until the constitutionality of the CTA is determined, probably by the Supreme Court.
Other CTA Cases
There are a multitude of cases across the country challenging the CTA’s constitutionality that are pending in various postures. Already before the close of business on January 23, 2025, a copy of the Supreme Court’s TTCS decision was filed in Small Business Ass’n of Michigan v. Yellen.[19] We should expect that similar filings will soon be made with other federal district courts before which CTA challenges are pending.
At the appellate level, in addition to Texas Top Cop Shop, there are appeals pending in the U.S. Courts of Appeals for the Eleventh, Ninth, and Fourth Circuits in National Small Business United v. Yellen,[20] Firestone v. Yellen,[21] and Community Associations Institute v. Yellen, respectively.[22] Only National Small Business United involved injunctive relief, but it was restricted to the parties to that suit. That case has been fully briefed, and oral argument was held on September 27, 2024. Firestone and Community Associations Institute are at far earlier stages, and neither involved the trial court granting injunctive relief; in fact, each is an appeal of the district court’s denial of a preliminary injunction.[23] Whether and how the Supreme Court’s decision in TTCS will impact those appeals remains to be seen. Also, while it is unknown whether the Eleventh Circuit has delayed publishing its decision in National Small Business United in the face of the preliminary injunction issued in TTCS, that factor is now set aside, perhaps affording that court more leeway to proceed. Moreover, new injunctive relief issued at the federal appeals court level could result from the decisions in any of these appeals.
At the trial court level, it is worth noting that on December 30, in the Hotze v. U.S. Department of the Treasury case presently pending in Texas, a motion for preliminary injunction was denied as moot in light of the relief already granted in Texas Top Cop Shop, with the court writing thus:
Accordingly, this Court is aware of no authority where one district court issued a nationwide injunction and parties in a parallel case subsequently urged for the same relief. As a threshold matter of logic, there is no further relief this Court may provide to Plaintiffs responsive to the instant Motion. The CTA and its Rule have already been enjoined to the fullest possible extent. After Texas Top Cop Shop, issuing a preliminary injunction on similar or distinct legal bases would amount to an advisory opinion under this procedural posture.[24]
Filing Deadlines
As a practical matter, especially for companies formed in 2024 that had not yet filed their BOIRs and for pre-2024 companies that had expected to be required to file BOIRs by January 1, 2025, concerns remain, including the CTA’s $606 per day penalty.[25]
Filing deadlines come in essentially four categories: (i) the initial filing deadline for all reporting companies preexisting January 1, 2024 (referred to herein as legacy companies); (ii) the initial filing deadline for reporting companies created on or after January 1, 2024, and before January 1, 2025 (referred to herein as 2024 companies); (iii) the initial filing deadline for companies created on or after January 1, 2025 (referred to herein as 2025 companies); and (iv) the filing deadlines for updating or correcting previously filed BOIRs.[26] Under the Reporting Rules, (i) legacy companies had until not later than January 1, 2025, to file an initial BOIR; (ii) 2024 companies had ninety days from formation (or registration) to file an initial BOIR; (iii) 2025 companies have thirty days within which to file an initial BOIR; and (iv) all companies, having filed a BOIR, have thirty days within which to file an update to any changes from the last filed report.[27] Obviously, the “not later than January 1, 2025” initial filing deadline for legacy companies is in the rearview mirror, as are the initial filing deadlines for many companies created after September 2, 2024, that did not yet make an initial filing.[28] During the brief period in which the TTCS preliminary injunction was stayed by the Fifth Circuit motions panel, FinCEN issued (in retrospect, short-lived) updated reporting deadlines, essentially affording most companies an additional thirteen days within which to make their initial filings.[29] Those modified deadlines are likewise in the rearview mirror.
On the morning of January 24, 2025, FinCEN published on its website an updated alert:
Alert: Ongoing Litigation—Texas Top Cop Shop, Inc., et al. v. McHenry, et al., No. 4:24-cv-00478 (E.D. Tex.) & Voluntary Submissions [Updated January 24, 2025]
In light of a recent federal court order, 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 order remains in force. However, reporting companies may continue to voluntarily submit beneficial ownership information reports.
****
On January 23, 2025, the Supreme Court granted the government’s motion to stay a nationwide injunction issued by a federal judge in Texas (Texas Top Cop Shop, Inc. v. McHenry—formerly, Texas Top Cop Shop v. Garland). As a separate nationwide order issued by a different federal judge in Texas (Smith v. U.S. Department of the Treasury) still remains in place, reporting companies are not currently required to file beneficial ownership information with FinCEN despite the Supreme Court’s action in Texas Top Cop Shop. Reporting companies also are not subject to liability if they fail to file this information while the Smith order remains in force. However, reporting companies may continue to voluntarily submit beneficial ownership information reports.[30]
So, as of now and until there is a change in circumstances such as the lifting of the Smith preliminary injunction, no BOIR filings are due, and there are no filing deadlines. But what will happen if the Smith injunction is stayed or otherwise lifted? What then will be the filing deadlines? That is a great question, and as of now there is no answer. All else being equal, we would not only expect FinCEN to issue another alert setting forth revised deadlines (as they did following the Fifth Circuit’s December 23 lifting of the TTCS preliminary injunction) but would also expect a scramble among attorneys to contact clients and get them reengaged in the CTA compliance process—followed by a flurry of filings on FinCEN’s BOIT (formerly BOSS) system.
But all things are not equal, and no reader is unaware of the tumult resulting from the new presidential administration and the deluge of executive orders issued beginning on the afternoon of January 20, 2024. One of those executive orders, entitled “Regulatory Freeze Pending Review” provides in part:
I hereby order all executive departments and agencies to take the following steps:
(1) Do not propose or issue any rule in any manner, including by sending a rule to the Office of the Federal Register (the “OFR”), until a department or agency head appointed or designated by the President after noon on January 20, 2025, reviews and approves the rule.[31]
Under the executive order, administrative agencies are not to issue any “rule” without the consent of one of the apparatchiks appointed to the new administration’s nomenklatura. Under the executive order, rule includes “any “regulatory action,” as defined in section 3(e) of Executive Order No. 12866 of September 30, 1993, as amended, and any “guidance document,” as defined in section 2(b) of Executive Order No. 13891 of October 9, 2019. Under this definition, “‘[r]egulatory action’ means any substantive action by an agency (normally published in the Federal Register) that promulgates or is expected to lead to the promulgation of a final rule or regulation, including notices of inquiry, advance notices of proposed rulemaking, and notices of proposed rulemaking.” Under the CTA, the due dates for the filing of BOIRs have been set by the promulgation or amendment of the Reporting Rules, published in the Federal Register.[32] On the other hand, FinCEN has extended these dates informally through “alerts” posted on its website.[33] Thus, it is not entirely clear whether FinCEN can even provide revised filing dates without defying the new executive order.
Whether this prohibition will limit FinCEN’s ability to promulgate new deadlines, in effect amending the Reporting Rules, remains to be seen. It bears noting that FinCEN’s amended alert of January 24, 2025, did nothing more than acknowledge that the situation remains as it was pre–January 20, 2025—namely, that there are no enforceable filing deadlines presently in effect and that all filings are presently voluntary at this time. The imposition of new filing deadlines via an alert is a different matter.
Going Forward: Possible FinCEN Considerations
As noted, as of noon (EST) on February 2, 2025, no notice of appeal or emergency motion to stay the preliminary injunction has been filed in the Smith case. Even assuming that the government decides to continue to defend the CTA, it is entirely possible that it will allow the status quo ante[34] to continue until the constitutionality of the CTA is determined, probably by the Supreme Court. Obviously, it is currently impossible to predict how the government will proceed, or even who will make these decisions. What could it be thinking about the future?
The U.S. regime change implicates the question of whether the new administration wishes the preliminary injunction be lifted before the final adjudication of the validity of the CTA. Discerning what the administration desires in terms of the ultimate resolution of the question of the CTA’s validity is beyond the scope of this article. While some members of the administration, such as Secretary of State Marco Rubio, have expressed a favorable opinion of the CTA, other indications suggest that the new administration may not be entirely supportive of an end to the preliminary injunction. Among these are the following:
- Project 2025 expressly calls for the repeal of the CTA.[35]
- Senators Tommy Tuberville (R., Ala.) and James E. Risch (R., Idaho) have introduced a bill for the repeal of the CTA.[36]
- Several Republican members of Congress have joined in briefs in the Supreme Court in opposition to the government’s petition to stay the preliminary injunction in the Texas Top Cop Shop litigation.[37]
- Twenty-four state attorneys general (including the attorney general of Florida, a position formerly held by the U.S. attorney general nominated by the president) have joined in briefs in the Supreme Court in opposition to the government’s petition to stay the preliminary injunction in the Texas Top Cop Shop litigation.[38]
- Recently confirmed Secretary of the Treasury Scott Bessent’s response to a question as to the CTA is fairly characterized as ambivalent.[39]
- FinCEN’s concern with the emergency nature of temporary injunctions has not been consistent: it has not felt the need to seek emergency relief with respect to each temporary injunction issued against the CTA.[40]
Best Practices: Legal Protection on the CTA Roller Coaster
Initially, to suggest that the recent back and forth as to the CTA is a roller coaster is unfair to roller coasters—on a roller coaster, you know when and where the ride will end, and you intentionally decide to go on the ride. Attorneys and clients have been befuddled by the on-again, off-again drama as the various courts and FinCEN have intervened, and there is understandable fatigue. In addition, much of the fourth quarter of 2024’s momentum toward compliance for legacy companies has been lost.
So, what to do now? The Smith preliminary injunction is, as of this writing, in effect, but that could change at any time, whereupon either (i) FinCEN will issue new guidance as to reporting deadlines or (ii) FinCEN will not be allowed to act, and all reporting companies that did not file either initial or updated BOIRs within the originally applicable deadlines will be in (retroactive) default and subject to the civil penalties and criminal fines detailed in the CTA. While not making a voluntary BOIR filing in the current environment is entirely permitted, you and your clients (or at least some of them) may believe it most expedient to make voluntary filings so as to cut off any potential exposure and “get it out of the way.” Others may decide to continue with assessment of how the CTA and the Reporting Rules apply to particular companies and their beneficial owners, holding off on filings unless and until a filing obligation is reinstated and then filing initial and, in some instances, updated BOIRs. We see merit in both approaches. Others will continue to ignore the CTA, hoping it goes away forever, a mindset that will necessitate a “fire drill” response if filings should again become mandatory. While a possible approach, we cannot recommend it as a best practice.
In closing,[41] stay tuned for further developments.[42]
604 U.S. —, 2025 WL 272062 (U.S. Jan. 23, 2025) (No. 24A653). James McHenry, the acting U.S. attorney general, was substituted in the case style for former U.S. attorney general Merrick Garland. The case docket may be accessed online. See also Letter from Lyle C. Cayce, Clerk, U.S. Court of Appeals for the Fifth Circuit, to All Parties (Jan. 21, 2025) (Doc. No. 204) (giving notice that the case style is now Texas Top Cop Shop, Inc. v. McHenry). The case style was again updated on January 28, 2025, to include the then recently confirmed Secretary of the Treasury Scott Bessent. See Letter from Lyle C. Cayce, Clerk, U.S. Court of Appeals for the Fifth Circuit, to All Parties (Jan. 28, 2025) (Doc. No. 209). ↑
The prior history of the Texas Top Cop Shop case and related litigation challenging the constitutionality of the CTA is recounted in Christina Houston, Robert R. Keatinge, Thomas E. Rutledge & Jim Wheaton, How FinCEN Stole Christmas: The Corporate Transparency Act, Year 1, Bus. L. Today (Jan. 13, 2025). ↑
Tex. Top Cop Shop, No. 24A653, 2025 WL 272062, at *1. ↑
Id. (citations omitted). ↑
Id. (emphasis in original) (citation omitted). Justice Jackson is correct that there was a multiyear delay in the application of the CTA to companies preexisting January 1, 2024, but some context is in order. The CTA was approved on January 1, 2021. Notwithstanding a change in presidential administration, just three months later FinCEN issued an advance notice of proposed rulemaking (“ANPR”) as to the proposed regulations called for by Congress in the CTA. Beneficial Ownership Information Reporting Requirements, 86 Fed. Reg. 17,557 (Apr. 5, 2021) (ANPR). There then followed a notice of proposed rulemaking (“NPRM”). Beneficial Ownership Information Reporting Requirements, 86 Fed. Reg. 69,920 (Dec. 8, 2021) (NPRM). Then, some ten months later, the Reporting Rules were finalized in Beneficial Ownership Information Reporting Requirements, 87 Fed. Reg. 59,498 (Sept. 30, 2022) (final), addressing in the process of drafting the final rules some 240 comments tendered in response to the NPRM. Beneficial Ownership Information Reporting Requirements, 87 Fed. Reg. at 59,509. It was only from that point in late 2022 that FinCEN could begin designing the interface through which beneficial ownership information report (“BOIR”) information would be submitted and the database in which it would be stored, a process that required further publication and solicitation of comment. Beneficial Ownership Information Access and Safeguards, and Use of FinCEN Identifiers for Entities, 87 Fed. Reg. 77,404 (Dec. 16, 2022) (proposed); Beneficial Ownership Information Access and Safeguards, 88 Fed. Reg. 88,732 (Dec. 22, 2023) (final). The proposal received ninety-one comments. Beneficial Ownership Information Access and Safeguards, 87 Fed. Reg. 77,404. While it was not until January 1, 2024, that any reporting company could submit a BOIR, companies formed on or after that date have been obligated to make initial and, if appropriate, updated reports to the effect that the first CTA filing obligations arose three, and not four, years after its passage. The “setting an enforcement date of nearly four years after Congress enacted the law” criticism applies only as to the “not later than” compliance date set for reporting companies preexisting January 1, 2024. Moreover, the CTA legislation contemplated from the beginning a phase-in of up to two years for filings by existing companies; FinCEN shortened that permissible timeline by a full year when it finalized the Reporting Rules. ↑
Smith v. U.S. Dep’t of the Treasury, No. 6:24-cv-00336, 2025 WL 41924 (E.D. Tex. Jan. 7, 2025). ↑
See, e.g., Kelsey Reichmann, Supreme Court Lifts Pause on Corporate Transparency Act, Courthouse News Serv. (Jan. 23, 2025) (“The Supreme Court put a federal financial reporting law back on the books Thursday, forcing companies to disclose information that is used by malign actors to conceal their ownership and facilitate illicit activities.”); Zach Schonfeld, Supreme Court Reinstates Federal Anti-Money Laundering Law, Hill (Jan. 23, 2025) (“The Supreme Court on Thursday agreed to reinstate a federal anti-money laundering law at the federal government’s request as a legal challenge proceeds in a lower court.”); Supreme Court Allows Small Business Registration Rule to Take Effect, Aimed at Money Laundering, Associated Press (Jan. 24, 2025) (“The Supreme Court action allows enforcement of the registration requirement while the Texas case winds through the courts.”); Supreme Court’s Decision Revives Controversial Corporate Transparency Act, Devdiscourse (Jan. 24, 2025) (“The Supreme Court has reinstated a critical requirement for millions of small businesses to register with the Treasury Department, aiming to tackle money laundering and financial fraud.”); Supreme Court Reinstates Corporate Transparency Act Mandate, Se. AgNet (Jan. 24, 2025) (“The U.S. Supreme Court has decided to lift the injunction that temporarily halted enforcement of the Corporate Transparency Act (ACT) reporting requirements, thus now allowing enforcement of the act to move forward.”); NCBA Statement on Supreme Court Decision to Reinstate Dreaded Corporate Transparency Act Mandate, KRVN (Jan. 24, 2025) (“The U.S. Supreme Court’s decision will allow enforcement of the act to move forward.”); SCOTUS Allows Corporate Transparency Act Reporting Requirements to Resume, Morning AgClips (Jan. 24, 2024) (“On Thursday, Jan. 23, 2025, SCOTUS ruled to allow the Government to enforce the CTA, which requires millions of businesses to file BOI reports. The justices stayed, or lifted, the nationwide injunction that had been blocking the CTA’s enforcement. This decision permits the government to proceed with implementing the CTA while its merits are reviewed by the U.S. Court of Appeals for the Fifth Circuit, which is scheduled to hold oral arguments on March 25.”). ↑
The Reporting Rules appear at 31 C.F.R. §§ 1010.380(a) et seq. As noted, the “final” BOIR regulations were released in Beneficial Ownership Information Reporting Requirements, 87 Fed. Reg. 59,498. The final rules followed from Beneficial Ownership Information Reporting Requirements, 86 Fed. Reg. 69,920 (NPRM), which itself followed from Beneficial Ownership Information Reporting Requirements, 86 Fed. Reg. 17,557 (ANPR). Those “final” regulations detail certain due dates, amended by Beneficial Ownership Information Reporting Deadline Extension for Reporting Companies Created or Registered in 2024, 88 Fed. Reg. 66,730 (Sept. 28, 2023); supplemented with regard to the use of FinCEN identifiers by the release of Use of FinCEN Identifiers for Reporting Beneficial Ownership Information of Entities, 88 Fed. Reg. 76,995 (Nov. 8, 2023); and expanded with regard to the exemption for public utilities (31 C.F.R. § 1010.380(c)(2)(xvi)) in Update to the Public Utility Exemption Under the Beneficial Ownership Information Reporting Rule, 89 Fed. Reg. 83,782 (Oct. 18, 2024)—collectively, the “Reporting Rules.” ↑
See infra notes 13–18 and accompanying text. ↑
On December 27, 2024, the Fifth Circuit granted the motion for expedited consideration of the Texas Top Cop Shop case and set the following briefing schedule: appellants’ brief is due on February 7, 2025; appellees’ brief is due on February 21, 2025; and appellants’ reply brief is due on February 28, 2025. See Letter from Lyle C. Cayce, Clerk, U.S. Court of Appeals for the Fifth Circuit, to Counsel (Dec. 27, 2024) (Doc. No. 163). Oral argument in Texas Top Cop Shop, Inc. v. McHenry has been scheduled for 10:00 a.m. on March 25, 2025. See Letter from Lyle C. Cayce, Clerk, U.S. Court of Appeals for the Fifth Circuit, to Counsel (Dec. 27, 2024) (Doc. No. 165-2) (case calendar). ↑
But see below as to the Smith case. ↑
Alternatively, it is possible that the Fifth Circuit, if it rules against the government, would fashion its own relief that would replace that ordered by the district court, that this relief might include a new injunction, and that the government could again apply to the Supreme Court for a new stay. At that point, to the extent that the stay was granted because of concerns about the ability of federal district courts to issue nationwide injunctions, a different result could obtain. ↑
Smith v. U.S. Dep’t of the Treasury, No. 6:24-cv-00336, 2025 WL 41924 (E.D. Tex. Jan. 7, 2025). ↑
See id. at *14 (Doc. No. 30). ↑
The Reporting Rules are set forth at 31 C.F.R. §§ 1010.380(a) et seq. See also supra note 8. ↑
Reply in Support of Application for a Stay of the Injunction Issued by the United States District Court for the Eastern District of Texas at 17 n.2, McHenry v. Tex. Top Cop Shop, Inc., 604 U.S. —, 2025 WL 272062 (U.S. Jan. 23, 2025) (No. 24A653) (emphasis in original):
Since the filing of the government’s stay application, another district court has concluded that the Act likely exceeds Congress’s enumerated powers. See D. Ct. Doc. 30, at 33, Smith v. United States Department of the Treasury, No. 24-cv-336 (E.D. Tex. Jan. 7, 2025). That court issued a party-specific injunction prohibiting enforcement of the Act against the plaintiffs alongside a universal stay of the Reporting Rule under Section 705. See id. at 33–34. This Court’s disposition of the government’s application here will likely affect that case as well. ↑
In response, the plaintiffs in that case will argue that the relief they have been awarded in their parallel proceeding is independent of whatever action was taken by the Supreme Court in another case, and that no element of issue preclusion arises. ↑
See the history of the effective date, supra note 5. It is worth noting that the filing requirements of the CTA have been in effect since January 1, 2024, for existing reporting companies created or registered on or after January 1, 2024, but do not come into effect for reporting companies created or formed before that date (referred to in the CTA as existing entities but described in the Reporting Rules, other administrative pronouncements, and this article as existing reporting companies). Under the Reporting Rules, existing reporting companies were scheduled to become subject to the Reporting Rules on January 1, 2025. As a result of the initial injunction issued in Texas Top Cop Shop, existing reporting companies were not required to file initial BOIRs on January 1, 2025, and the requirement for all information reporting for all reporting companies was stayed. For the short hiatus in the preliminary injunction from December 23, 2024, to December 27, 2025, FinCEN issued a revised schedule that extended the filing dates for all initial BOIRs (in the case of existing reporting companies, to January 13, 2024). As the parties to most of the litigation are existing reporting companies, much of the language of the cases speaks of the initial effective date of the CTA as January 1, 2025. Thus, the status quo ante at the time of the initial preliminary injunction in Texas Top Cop Shop was that reporting companies formed after September 3, 2024, and existing reporting companies were not yet obligated to file initial BOIRs. The Smith preliminary injunction appears to stay the obligation on reporting companies that have filed their BOIRs to update those BOIRs. Its effect on reporting companies that were required to file initial BOIRs before December 3, 2024, but had not done so is not clear. See Houston et al., supra note 2 ↑
Small Bus. Ass’n of Mich. v. Yellen, No. 1:24-cv-00314-RJJ-SJB (W.D. Mich. filed Jan. 23, 2025), ECF No. 46 (plaintiffs’ notice of supplemental authority). Likewise, the same order was filed on January 27 in the Boyle case pending in Maine. Boyle v. Yellen, No. 2:24-cv-00081-SDN (D. Me. filed Jan. 27, 2025) (Doc. No. 50) (notice of supplemental authority). Purely as an authorial aside, the Government’s Memorandum in Support of a Motion to Dismiss filed in Small Business Ass’n of Michigan (Doc. No. 31) is a particularly well-written review of why the CTA is a constitutional exercise of Congress’s authority. ↑
Nat’l Small Bus. United v. Yellen, 721 F. Supp. 3d 1260, 2024 U.S. Dist. LEXIS 36205 (N.D. Ala. 2024), appeal filed, Nat’l Small Bus. United v. U.S. Dep’t of the Treasury, No. 24-10736 (11th Cir. Mar. 11, 2024). ↑
Firestone v. Yellen, No. 3:24-cv-1034-SI, 2024 WL 4250192, 2024 U.S. Dist. LEXIS 170085 (D. Or. Sept. 20, 2024), appeal filed, No. 24-6979 (9th Cir. Nov. 19, 2024); see also Firestone, No. 3:24-cv-1034-SI, 2024 WL 5159198, 2024 U.S. Dist. LEXIS 228679 (D. Or. Dec. 18, 2024) (denying injunctive relief pending appeal). ↑
Cmty. Ass’ns Inst. v. Yellen, No. 1:24-cv-1597, 2024 WL 4571412, 2024 U.S. Dist. LEXIS 193958 (E.D. Va. Oct. 24, 2024), appeal filed, No. 24-2118 (4th Cir. Nov. 27, 2024). ↑
Firestone, No. 3:24-cv-1034-SI; Cmty. Ass’ns Inst., No. 1:24-cv-1597. ↑
Hotze v. U.S. Dep’t of the Treasury, No. 2:24-cv-00210-Z, 2024 WL 5248148, at *1 (N.D. Tex. Dec. 30, 2024). It is intriguing that the same logic did not foreclose the injunction issued in Smith. In Hotze, the parties on January 30, 2025, filed a joint motion to stay proceedings (Doc. No. 41); and on January 31, the court issued an order staying the proceeding for thirty days, with directors to file a joint status report one week before the expiration of the stay and to update the court (presumably on an ongoing basis) on the status of the Smith preliminary injunction (Doc. No. 42).
In passing, we will reference the status of Midwest Ass’n of Housing Cooperatives v. Yellen (a dispute whose style will likely be updated soon), wherein the plaintiffs seek a declaration that housing cooperatives are exempt from the CTA irrespective of their organizational structure. No. 2:24-cv-12929 (E.D. Mich. filed Nov. 5, 2024). On November 26, 2024, a curious order was entered in this case. Subsequent to a status conference held to discuss matters, including the Plaintiffs’ Emergency Motion for Declarator Relief, or Alternatively, Preliminary Injunctive Relief (Doc. No. 17), and responding to the government’s request to hold the case in abeyance pending the decision of the Eleventh Circuit in National Small Business United, the court agreed to the request for an abeyance “provided the government refrain from arresting, jailing, imprisoning, or imposing civil penalties against plaintiffs or individuals affiliated with plaintiffs for any violation of the statute during the period of abeyance.” Id. (E.D. Mich. Nov. 26, 2024) (Doc. No. 26). ↑
The CTA provides for a $500 per day civil penalty with respect to willful failures to file a required BOIR. CTA, 31 U.S.C. § 5336((h)(1); see also 31 C.F.R. § 1010.380(g). Willfully is itself a defined term—namely, the “voluntary, intentional violation of a known legal duty.” CTA, 31 U.S.C. § 5336(h)(6). That $500 per day amount is adjusted each year for inflation. Federal Civil Monetary Penalties Inflation Adjustment Act of 1990, Pub. L. No. 101-410 (Oct. 5, 1990), as revised by section 701 of the Bipartisan Budget Act of 2015, Pub. L. No. 114-74 (Nov. 2, 2015); see also FinCEN FAQ K.2 (Apr. 8, 2024). Pursuant to a recent release from FinCEN, for 2025 the civil penalty was adjusted (and increased) to $606 per day. See Federal Crimes Enforcement Network; Inflation Adjustment of Civil Monetary Penalties, 90 Fed. Reg. 5629 (Jan. 17, 2025) (final rule); see also Jay Adkisson, Fearmongering the Civil and Criminal Penalties of Beneficial Ownership Information Reporting, Forbes (Jan. 27, 2025) (discussing the “willful” element of the penalty and fine/imprisonment provisions of the CTA). ↑
These deadlines are referenced as applied to domestic reporting companies, but they apply equally to foreign reporting companies first registered in those time periods. See 31 C.F.R. § 1010.380(c)(1)(ii) (definition of foreign reporting company). ↑
See 31 C.F.R. §§ 1010.380(a)(1), 1010.380(a)(2); Houston et al., supra note 2, at nn.57–63 and accompanying text. To confirm a point made above, although the preliminary injunction against the Reporting Rules and these deadlines issued in TTCS were set aside by the U.S. Supreme Court, there remains in place as of this writing the similar injunction issued in Smith. ↑
Since December 3, 2024, and the issuance of the TTCS preliminary injunction, FinCEN has permitted voluntary filings of initial and updated BOIRs. ↑
See Houston et al., supra note 2, at n.21 and accompanying text. ↑
Fin. Crimes Enf’t Network, Alert, Ongoing Litigation—Texas Top Cop Shop, Inc., et al. v. McHenry et al., No. 4:24-cv-00478 (E.D. Tex.) & Voluntary Submissions (updated Jan. 24, 2025) (emphasis in original). This alert replaces a far longer alert (which is no longer available on the FinCEN website) that provided thus:
Alert: Notice Regarding National Small Business United v. Yellen, No. 5:22-cv-01448 (N.D. Ala.) [Updated January 2, 2025]
On Tuesday, December 3, 2024, in the case of Texas Top Cop Shop, Inc., et al. v. Garland, et al., No. 4:24-cv-00478 (E.D. Tex.), the U.S. District Court for the Eastern District of Texas, Sherman Division, issued an order granting a nationwide preliminary injunction. The Department of Justice, on behalf of the Department of the Treasury (Treasury), filed a Notice of Appeal on December 5, 2024 and separately sought a stay of the injunction pending that appeal. . . . On December 31, 2024, the Department of Justice, on behalf of Treasury, sought a stay of the injunction pending the ongoing appeal from the Supreme Court of the United States. In the meantime, as of December 26, 2024, the injunction issued by the district court in Texas Top Cop Shop, Inc. is once again in effect. FinCEN is complying with—and will continue to comply with—the district court’s order for as long as it remains in effect. As a result, reporting companies are not currently required to file beneficial ownership information with FinCEN. Reporting companies may continue to voluntarily submit beneficial ownership information reports.
Other Updates
Texas Top Cop Shop, Inc. is only one of several cases that have challenged the Corporate Transparency Act (CTA) pending before courts around the country.
As noted in a separate alert, on March 1, 2024, [in the case of National Small Business United v. Yellen, No. 5:22-cv-01448 (N.D. Ala.),] the U.S. District Court for the Northern District of Alabama, Northeastern Division, entered a final declaratory judgment, concluding that the CTA exceeds the Constitution’s limits on Congress’s power and enjoining Treasury from enforcing the CTA against the plaintiffs. As a result, the government, even in the absence of an injunction, is not currently enforcing the Corporate Transparency Act against the plaintiffs in that action: Isaac Winkles, reporting companies for which Isaac Winkles is the beneficial owner or applicant, the National Small Business Association, and members of the National Small Business Association (as of March 1, 2024).
However, since March 2024, other district courts have denied requests to enjoin the CTA, ruling in favor of Treasury—in particular:
- On April 29, 2024, in Small Business Association of Michigan, et al. v. Yellen, et al., No. 1:24-cv-314 (W.D. Mich.), the U.S. District Court of the Western District of Michigan, denied a motion for a preliminary injunction.
- On September 20, 2024, in Firestone, et al. v. Yellen, et al., No. 3:24-cv-01034 (D. Or.), the U.S. District Court for the District of Oregon also declined to issue a preliminary injunction on behalf of plaintiffs—seven individuals—challenging the constitutionality of the CTA. In denying plaintiffs’ motion, the district court found that plaintiffs had not shown a likelihood of success on the merits with respect to their claims that the CTA exceeds Congress’ authority under the Constitution and violates the First, Fourth, Fifth, Eighth, Ninth, and Tenth Amendments. In its opinion and order, the district court noted that enjoining enforcement of the CTA “would interfere with Congress’ judgment, supported by extensive factual findings, about how best to combat money laundering, the financing of terrorism, tax fraud, and other serious crimes that affect the national economy or national security.” Plaintiffs have appealed the court’s decision, and that appeal is pending before the Ninth Circuit.
- On October 24, 2024, in Community Associations Institute, et al. v. Yellen, et al., No. 1:24-cv-01597 (E.D. Va.), the U.S. District Court for the Eastern District of Virginia likewise denied a motion by plaintiffs, including an organization that represents community associations throughout the country, for a preliminary injunction. In doing so, the district court found that plaintiffs were unlikely to succeed on their claims that (1) Congress overstepped the outer bounds of its commerce power in enacting the CTA; (2) the CTA violates the First and Fourth Amendments; and (3) the statutory exemptions in the CTA relieve community associations of the obligation to report beneficial ownership information. Plaintiffs have appealed the court’s decision, and that appeal is pending before the Fourth Circuit.
The government continues to believe—consistent with the orders issued by the U.S. District Courts for the District of Oregon and the Eastern District of Virginia— that the CTA is constitutional and will continue defending the law as necessary.
Fin. Crimes Enf’t Network, Alert, Notice Regarding National Small Business United v. Yellen, No. 5:22-cv-01448 (N.D. Ala.) (updated Jan. 2, 2025) [hereinafter Jan. 2 Alert]. ↑
Exec. Order: Regulatory Freeze Pending Review (Jan. 20, 2025). ↑
See, e.g., 31 C.F.R. pt. 1010 (specifically, Use of FinCEN Identifiers for Reporting Beneficial Ownership Information of Entities, 88 Fed. Reg. 76,995 (Nov. 8, 2023) (RIN 1506-AB49); Beneficial Ownership Information Reporting Deadline Extension for Reporting Companies Created or Registered in 2024, 88 Fed. Reg. 83,499 (Nov. 30, 2023) (RIN 1506-AB62); and Beneficial Ownership Information Reporting Requirements, 87 Fed. Reg. 59,498 (Sept. 30, 2022) (RIN 1506-AB49)). ↑
Beneficial Ownership Information, Fin. Crimes Enf’t Network (last visited Feb. 3, 2025). ↑
See supra note 18. ↑
Heritage Foundation, Project 2025: Mandate for Leadership: The Conservative Promise 707–08 (2023) (“Congress should repeal the Corporate Transparency Act, and FinCEN should withdraw its poorly written and overbroad beneficial ownership reporting rule. Both are targeted at the smallest businesses in the U.S. (those with 20 or fewer employees) and will do nothing material to impede criminal finance. The FinCEN beneficial ownership reporting rule will impose costs exceeding $1 billion annually and is exceedingly poorly drafted. FinCEN itself estimates that more than 33 million businesses will be affected and that costs will be $547 million to $8.1 billion annually.” (citations omitted)). ↑
S. 100, 119th Cong. (2025). The bill text is not yet posted on Congress.gov, but it is assumed that it will be identical to the text of the bill submitted in the 118th Congress as S. 4297. See also Press Release, Coach Tommy Tuberville, Tuberville Reintroduces Legislation to Repeal Corporate Transparency Act. Protect Small Businesses (Jan. 15, 2025). In the House, parallel proposed legislation has been introduced by Rep. Davidson (R., Ohio). Press Release, Warren Davidson, Rep. Warren Davidson Re-Introduces the Repealing Big Brother Overreach Act (Jan. 15, 2025). In addition, legislation has been submitted to extend to 2025 the initial filing deadline for reporting companies created or first qualified before January 1, 2024. Protect Small Businesses from Excessive Paperwork Act of 2025, H.R. (not yet assigned), 119th Cong. (2025) (introduced by Rep. Zach Nunn (R., Iowa)); see also Tyson Fisher, Bipartisan Bill Seeks to Delay Beneficial Ownership Information Reporting Deadline, Land Line (Jan. 29, 2025). ↑
Brief of Amici Curiae States of West Virginia, Kansas, South Carolina, and 22 Other States in Support of Respondents, Garland v. Tex. Top Cop Shop, No. 24A653 (U.S. Jan. 9, 2025). ↑
Brief of Amici Curiae United States Senator Cynthia M. Lummis and Wyoming Secretary of State Chuck Gray in Opposition to the Emergency Application for a Stay, Garland v. Tex. Top Cop Shop, No. 24A653 (U.S. Jan. 10, 2025); Brief of U.S. Senator Thom Tillis and Thirteen Other Members of Congress as Amici Curiae in Opposition to a Stay, Garland v. Tex. Top Cop Shop, No. 24A653 (U.S. Jan. 14, 2025). ↑
In a hearing to consider the nomination of Scott Bessent to be secretary of the Treasury, the following exchange occurred:
Question 55: The Corporate Transparency Act requires reporting of beneficial ownership information to prevent criminals from using businesses to conceal their identities and facilitate illicit activity like money laundering, sanctions evasion, and terrorist financing. The first Trump Administration strongly supported the Corporate Transparency Act, which requires many U.S. companies to report their true, or “beneficial,” owners to a confidential database housed at the U.S. Treasury, stating that the law would “assist law enforcement in detecting and preventing illicit activity such as terrorist financing and money laundering.” Now the Trump Administration is in charge of administering that database, including providing access to it for law enforcement and national security officials.
A. Do you see the Corporate Transparency Act as an important new tool for the U.S.’ ability to prevent terrorism and to follow the money that finances it?
B. Do you agree with the authors of Project 2025 that the Corporate Transparency Act should be repealed by Congress?
C. Will you work with Congress to make sure that the office responsible for maintaining the database, the Financial Crimes Enforcement Network (FinCEN), has sufficient staff, technology, and other necessary funding to make the most out of this new tool?
D. Absent such action by Congress, will you commit to fully implementing and enforcing the provisions of the Corporate Transparency Act?
E. Will you commit to retention of FinCEN’s beneficial ownership reporting rule?
Answer: I am committed to reviewing the regulatory implementation of the CTA to ensure that Treasury meets the law’s objective of combating illicit finance without unduly burdening small businesses as Congress directed. I also believe FinCEN should have the resources needed to fulfill its statutory responsibilities. As you know, the CTA has been enjoined by a federal court, so I think it would be premature for me to comment on any specific next steps until, if confirmed, I have the benefit of consulting with Treasury’s lawyers and we have more clarity from the courts.
Questions for the Record for Scott Bessent: Hearing to Consider the Nomination of Scott Bessent, of South Carolina, to be Secretary of the Treasury Before the S. Comm. on Fin., 119th Cong. 48–49 (2025) (citations omitted). The CTA did not come up in the course of his live testimony. Scott Bessent Confirmation Hearing, Rev (Jan. 16, 2025). ↑
See Jan. 2 Alert, supra note 30. It is interesting to note that the injunction in National Small Business United v. Yellen was raised in an amicus brief in the Texas Top Cop Shop Supreme Court litigation filed by National Small Business United’s attorney, former solicitor general Paul Clement, which argued that the lack of an emergency is evidenced by the fact that there has been no attempt to obtain emergency relief from the temporary injunction in that case. The brief states:
Either way, a petition for certiorari raising the question whether the CTA is constitutional appears heading this Court’s way—and it should arrive soon, as the Eleventh Circuit expedited its review for the very purpose of issuing a prompt decision.3 In these circumstances, by far the most sensible course is to preserve the preliminary injunction issued by the Eastern District of Texas until this Court can resolve a petition for certiorari arising out of the NSBA’s case in the Eleventh Circuit. The other option on the table—staying the injunction—would pave the way for the government to demand immediate compliance with the CTA even though this Court may declare that very statute unconstitutional on plenary review in a matter of months. It makes no sense for this Court to inflict the very irreparable disclosure-related injury that the CTA’s challengers are seeking to avoid before this Court can review the statute’s constitutionality in the usual course. That is particularly true given the asymmetric nature of the stakes. It would be virtually impossible to un-disclose vast quantities of private information to the federal government if the CTA’s unconstitutionality is eventually confirmed. By contrast, law-enforcement officials have been tackling money laundering for years without access to this information, and the federal government waited 27 months between promulgation of the rule and the initial January 1, 2025 deadline.
Brief for Amicus Curiae the National Small Business Association in Opposition to Applicants’ Request for a Stay, Garland v. Tex. Top Cop Shop, No. 24A653, at 10–11 (U.S. filed Jan. 10, 2024). It is particularly interesting that footnote 3 therein provides thus:
If the Eleventh Circuit issues a decision finding the CTA unconstitutional after the change in administration, and if the new administration does not file a petition for certiorari, that too would suggest that no emergency existed here in the first place. ↑
Postscript: As noted above, the analysis herein set forth was through noon on February 2, 2025. Be aware that on February 5 the government filed a Notice of Appeal in Smith, supra note 6 (Doc. No. 32). ↑
All members of the Business Law Section of the American Bar Association are encouraged to join the Committee on LLCs, Partnerships and Unincorporated Entities, and to then join its ListServ. The committee’s ListServ is active and is a go-to resource on matters involving the CTA, including the litigation challenging its constitutionality. ↑
