On December 3, 2024, the U.S. District Court for the Eastern District of Texas, in the case of Texas Top Cop Shop, Inc., et al. v. Merrick Garland, Attorney General of the United States, et al., issued a preliminary injunction against the enforcement of the Corporate Transparency Act on a nationwide basis. In response, the U.S. Attorney General filed a motion seeking a stay of the preliminary injunction on an emergency basis. On December 17, 2024, the U.S. District Court for the Eastern District of Texas upheld the preliminary injunction. However, the U.S. Department of Justice also filed an emergency motion with the Fifth Circuit Court of Appeals and has requested a ruling from the Fifth Circuit Court of Appeals by “no later than December 27, 2024, to ensure that regulated entities can be made aware of their obligation to comply before January 1, 2025.”
In the interim, the U.S. Department of Treasury’s Financial Crimes Enforcement Network (“FinCEN”) has issued a statement acknowledging that “reporting companies are not currently required to file their beneficial ownership information with FinCEN and will not be subject to liability if they fail to do so while the preliminary injunction remains in effect.” FinCEN noted that reporting companies may voluntarily submit beneficial ownership information reports, if they wish.
Ultimately, this means that (1) companies are not currently required to comply with the Corporate Transparency Act, and (2) the upcoming January 1, 2025 deadline to file a beneficial ownership information report for many companies formed prior to January 1, 2024 is not currently enforceable. Nevertheless, legal developments with respect to the preliminary injunction have developed at a rapid pace since December 3, 2024 and it is possible that the Fifth Circuit Court of Appeals could issue a ruling as early as this afternoon. Unfortunately, there is no way to know at this time how the Fifth Circuit will rule and whether the January 1, 2025 deadline will be reinstituted prior to January 1, 2025. Further, there may be additional legal developments in Texas Top Cop Shop, Inc., et al. v. Merrick Garland, Attorney General of the United States, et al., and challenges to the constitutionality of the Corporate Transparency Act.
In light of the foregoing, companies should stay apprised of subsequent developments.
If you have any questions regarding the Corporate Transparency Act, please reach out to your contact at Couch White, LLP or Christina Marvin, Esq. (cmarvin@couchwhite.com). General information regarding the Corporate Transparency Act and its reporting requirements can be found on FinCEN’s website located at www.fincen.gov/boi.