THE CORPORATE TRANSPARENCY ACT REPORTING REMAINS PAUSED
January 27, 2025
Over the past thirty days, a series of seemingly contradictory court decisions have been issued on the Corporate Transparency Act (CTA), a key federal anti-money laundering law. The CTA requires certain companies to report beneficial ownership information (BOI) about their owners to the Financial Crimes Enforcement Network (FinCEN).
On December 3, 2024, the U.S. District Court for the Eastern District of Texas issued a preliminary injunction in the case of Texas Top Cop Shop, Inc. v. McHenry (formerly, Texas Top Cop Shop, Inc. v. Garland), temporarily halting enforcement of the CTA. The government appealed this decision to the U.S. Court of Appeals for the Fifth Circuit.
On December 23, 2024, the Fifth Circuit Court reinstated the filing obligations and imposed a tight new deadline of January 13, 2025. However, just days later, a separate panel of Fifth Circuit judges reversed that decision, reinstating the nationwide preliminary injunction that blocks FinCEN from enforcing the CTA.
Complicating matters further, on January 7, 2025, a different district court in Texas issued a second nationwide injunction against the CTA in another case – Smith v. Treasury.
The government sought relief from the U.S. Supreme Court. On January 24, 2025, the Supreme Court granted the government’s request to stay the nationwide injunction. Notably, the Court’s ruling did not address the injunction issued in Smith.
Up to date, FinCEN released two statements confirming that reporting companies are not currently required to file BOI reports and that compliance with the CTA remains voluntary.
None of the decisions mentioned above addresses the core issue of whether the CTA is constitutional. Such challenge may soon become moot if the new Congress passes the “Repealing Big Brother Overreach Act” – a bill that aims to repeal the CTA.
We will continue to monitor the situation and provide updates. For further information regarding the CTA, please contact us.
