On December 23, 2024, a three-judge panel of the Fifth Circuit Court of Appeals stayed the lower court’s nationwide injunction against the Corporate Transparency Act (“CTA”). The ruling effectively revives the immediate enforceability of the CTA and its reporting requirements.
Just three weeks prior, on December 3, 2024, the U.S. District Court for the Eastern District of Texas issued a nationwide preliminary injunction that temporarily blocked the enforcement of the CTA its reporting rule (“Reporting Rule”). This ruling effectively halted the requirement for reporting companies to disclose beneficial ownership information to the Financial Crimes Enforcement Network (FinCEN) despite the impending deadline for reporting companies to comply.
The Fifth Circuit’s Ruling
The government successfully argued that the CTA is constitutional and vital for national security. The Fifth Circuit found minimal harm to businesses from compliance and emphasized the significant public interest in enforcing the law, granting a stay while an expedited appeal proceeds.
Notably, the Fifth Circuit was not convinced that lifting the District Court’s injunction only a few days before the compliance deadline applicable to entities formed before January 1, 2024 “would place an undue burden” on the plaintiffs. The Fifth Circuit reasoned that the injunction had “only been in place for less than three weeks as compared to the nearly four years that the [plaintiffs] have had to prepare since Congress enacted the CTA,” in addition to the year since FinCEN promulgated the reporting deadline.
FinCEN’s Response
In response to the Fifth Circuit’s ruling, FinCEN posted an alert on its website extending the filing deadline to January 13, 2025, if the reporting company was created or registered prior to January 1, 2024. Reporting companies created or registered on or after September 4, 2024 that had a deadline between December 3, 2024 and December 23, 2024 also have until January 13, 2025 to file their initial beneficial ownership information reports.
What’s Next?
Multiple scenarios could impact the CTA filing deadline. The plaintiffs could seek review from the full Fifth Circuit (not just a 3 judged panel) or they may appeal to the United States Supreme Court for an emergency stay of the deadline. Congress or the new administration may also step in and delay enforcement.
However, given the current information available and the Fifth Circuit’s ruling, we recommend complying with the CTA’s Reporting Rule. Further judicial or legislative extensions will just delay the inevitable and will get you out of monitoring the status of this law.
If you desire assistance complying with the Reporting Rule, please give us a call at 480-281-1512. Or if you desire more information on how to comply, please see CTA Compliance Tips.
