Publication
The Never-Ending Revolving Door: The Corporate Transparency Act Is On Ice (Again)
On December 26, 2024, the merits panel of the United States Court of Appeals for the Fifth Circuit issued an order vacating the earlier motions panel’s order from December 23, 2024, that had granted a stay of the nationwide preliminary injunction enjoining enforcement of the Corporate Transparency Act (CTA).
What Does this Mean for CTA Compliance?
The Court’s Order effectively reinstates the original nationwide preliminary injunction and overturns the stay from the December 23, 2024 Court Order. Thus, as of December 26, 2024, reporting entities are not currently required to file Beneficial Ownership Information (BOI) reports with FinCEN.
Turbulent History
Original Injunction
As previously reported (prior alert), the nationwide preliminary injunction, granted by the District Court, (i) enjoined the CTA, (ii) enjoined enforcement of the Reporting Rule by the Financial Crimes Enforcement Network (FinCEN) (the Treasury Department’s enforcement arm), and (iii) stayed the January 1, 2025, compliance deadline for reporting entities formed prior to January 1, 2024, to submit BOI reports.
Court of Appeals Order and Extension of BOI Reporting Deadline
After the District Court originally entered an order enjoining the enforcement of the CTA, the Government appealed, and on December 23, 2024, a motions panel of the Fifth Circuit Court of Appeals granted the government’s emergency motion for a stay of the nationwide preliminary injunction. That order also expedited the appeal to the next available oral argument panel. The appeal is now pending with the merits panel of the Fifth Circuit Court of Appeals.
Following this ruling on December 23, 2024, FinCEN extended the BOI reporting deadlines, including extending the deadline for pre-2024 existing reporting entities to January 13, 2025.
Overturning of Stay
On December 26, 2024, the Fifth Circuit Court of Appeals’ merits panel, citing the preservation of “… the constitutional status quo while the merits panel considers the parties’ weighty substantive arguments…”, vacated the December 23, 2024 section of the motions panel’s order granting the Government’s motion to stay the District Court’s nationwide preliminary injunction.
The CTA is not dead. However, with this latest ruling, BOI reports are not required to be filed (even with FinCEN’s extended deadlines). At this point, it is up to each reporting entity to decide if it wants to comply with the CTA’s BOI reporting requirement by the January 13, 2025 filing deadline (or other applicable filing deadlines for reporting entities formed in 2024 or thereafter) or if instead it wants to wait out the court process before filing any required BOI report.
Snell & Wilmer will continue to carefully monitor developments. While reporting entities may be able to delay filing BOI reports based on this latest ruling to reinstate the nationwide preliminary injunction, reporting entities should also monitor developments regarding this case and decide whether to continue efforts to collect necessary beneficial ownership information, should circumstances change.
Next Steps
The Government’s appeal of the preliminary injunction is now pending with the merits panel of Fifth Circuit Court of Appeals. The Government could appeal the new injunction to the United States Supreme Court for relief. If this were to happen and the Supreme Court lifted the current injunction, it is expected that FinCEN would again extend out the reporting time period to allow compliance.
It is uncertain how the Fifth Circuit will determine the constitutionality of the CTA.
Impacted entities or other interested non-governmental organizations may consider weighing in and filing an amicus curiae brief in this matter to inform the Fifth Circuit how its forthcoming opinion might impact business operations or other constitutional rights. While an order from the Fifth Circuit and actual filing dates could impact the anticipated timeline, amicus briefs supporting the DOJ are expected to be due as early as February and amicus briefs supporting the small business plaintiffs are expected to be due as early as March. It is unclear whether the Trump administration will continue the appeal. Or, even if the new administration decided to continue the appeal, what administration changes may occur as to the reporting requirements, timelines, and other logistical considerations under the CTA is uncertain.
There are also opportunities for congressional outreach regarding congressional action. Furthermore, for those entities that have already submitted BOI reports, it is important to understand how the government may utilize the information in such reports in enforcing other laws. Companies, trade organizations, and other interested parties should take the opportunity to review the impact of the CTA on their operations and determine whether to vocalize any concerns via the Fifth Circuit (or the Supreme Court, if relief is sought there) or through the legislative process.
About Snell & Wilmer
Founded in 1938, Snell & Wilmer is a full-service business law firm with more than 500 attorneys practicing in 16 locations throughout the United States and in Mexico, including Los Angeles, Orange County and San Diego, California; Phoenix and Tucson, Arizona; Denver, Colorado; Washington, D.C.; Boise, Idaho; Las Vegas and Reno, Nevada; Albuquerque, New Mexico; Portland, Oregon; Dallas, Texas; Salt Lake City, Utah; Seattle, Washington; and Los Cabos, Mexico. The firm represents clients ranging from large, publicly traded corporations to small businesses, individuals and entrepreneurs. For more information, visit swlaw.com.
