CURRENT MONTH (December 2024)
Game Off: Fifth Circuit’s Merits Panel Overturns Motions Panel, Reinstates Preliminary Injunction Staying Enforcement of the CTA
By Rachael Aspery, Douglas W. Charnas, and Jean-Paul Perrault, McGlinchey Stafford PLLC
In a rollercoaster of a ride, the merits panel of the U.S. Court of Appeals for the Fifth Circuit, on December 26, 2024, vacated the prior order of the Fifth Circuit’s motions panel staying the preliminary injunction enjoining enforcement of the Corporate Transparency Act (CTA). The last paragraph of the merit panel’s order reads:
The merits panel now has the appeal, which remains expedited, and a briefing schedule will issue forthwith. However, in order to preserve the constitutional status quo while the merits panel considers the parties’ weighty substantive arguments, that 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 is VACATED.
Once again, there is a nationwide preliminary injunction that: (1) enjoins the CTA, including enforcement of that statute and regulations implementing its beneficial ownership information (BOI) reporting requirements, and (2) stays all deadlines to comply with the CTA’s reporting requirements.
Fifth Circuit Lifts Texas Top Cop Injunction and FinCEN Reinstates Corporate Transparency Act Reporting Obligations—Then Injunction Reinstated
By Anthony O. Maceira
Note: This item was written prior to the December 26, 2024, decision by the merits panel of the U.S. Court of Appeals for the Fifth Circuit reinstating the nationwide preliminary injunction enjoining enforcement of the CTA. It has been updated, but for more details on the reinstatement of the injunction, see the first item in this month-in-brief.
On December 23, 2024, the Fifth Circuit Court of Appeals stayed a nationwide preliminary injunction previously issued in Texas Top Cop Shop, Inc. v. Garland, No. 4:24-cv-00478 (E.D. Tex.), which had initially halted enforcement of the Corporate Transparency Act (CTA). In its order, the Court of Appeals also resolved that the appeal will be expedited and put in calendar for the next available oral argument panel. The nationwide injunction had been granted by Judge Amos L. Mazzant III of the U.S. District Court for the Eastern District of Texas on December 3, 2024. As a result, the obligation for reporting companies to file beneficial ownership information (BOI) was paused by the Financial Crimes Enforcement Network (FinCEN).
With the Fifth Circuit’s December 23 decision, the CTA’s reporting requirements were reinstated. In response, FinCEN issued an alert confirming the return of filing obligations and announcing extended deadlines to account for the disruption caused by the injunction. Before the December 23 order was vacated and the reporting requirements once again enjoined, reporting companies created or registered before January 1, 2024, were to have until January 13, 2025, to file their initial BOI reports. Similarly, entities registered between September 4, 2024, and December 23, 2024, were to have until January 13, 2025, to comply. For companies registered between December 3, 2024, and December 23, 2024, an additional twenty-one days beyond their original deadlines were granted. Starting January 1, 2025, newly registered entities would have had thirty days from their effective registration date to file BOI reports.
The alert also provided guidance for certain exempt companies. Regardless of the injunction, plaintiffs in National Small Business United v. Yellen, including Isaac Winkles, businesses owned by Winkles, and members of the National Small Business Association as of March 1, 2024, are not currently required to file BOI reports, and entities qualifying for disaster relief may have deadlines that extend beyond January 13, 2025. NSBA issued a press release prior to FinCEN’s alert stating that “unless you were a member of NSBA as of March 1, 2024, you will be required to file your Beneficial Ownership Report (BOI) by Jan. 1. 2025.” Though all deadlines to comply with the CTA’s reporting requirements are now stayed, this was no longer correct following the administrative extension.
Legal challenges to the CTA remain active in various courts. While some, like the Eastern District of Virginia and the District of Oregon, have upheld the law’s constitutionality, cases such as Texas Top Cop Shop highlight ongoing debates over the CTA’s scope and implications. Sectors have proposed Congress enact filing extensions, but this effort has not seen much progress; the latest Continuing Resolution didn’t address the topic, which means we most likely won’t see any legislative movement until next Congress. The government argues that the law is essential for addressing financial crimes, including terrorism financing. Lawyers, accountants, consultants, and business owners must remain vigilant but ready to comply.
