Overview
In a whirlwind turn of events, on December 26, 2024, the US Fifth Circuit Court of Appeals (the Fifth Circuit), reversed itself and reinstated a nationwide injunction against enforcement of the Corporate Transparency Act (CTA).
As we reported in a prior client alert, on December 3, 2024, the US District Court for the Eastern District of Texas (the District Court) found that the CTA is likely unconstitutional and issued a nationwide preliminary injunction prohibiting enforcement of the law and its implementing regulations, promulgated at 31 C.F.R. § 1010.380, and ordered that the compliance deadline is stayed under the Administrative Procedure Act. The Fifth Circuit issued an initial ruling on December 23, 2024, staying the injunction, and FinCEN subsequently announced an extension of certain filing deadlines, including an extension of the January 1, 2025 deadline to January 13, 2025.
As a result of the Fifth Circuit's subsequent order on December 26, however, the nationwide injunction that the District Court issued on December 3, 2024, is back in effect. For as long as the injunction is in effect, there is no obligation to report beneficial ownership information (BOI) to FinCEN under the CTA, including BOI reports that would otherwise have been due by FinCEN's extended deadline of January 13, 2025.
Following the Fifth Circuit’s move to reinstate the injunction, FinCEN issued a statement confirming: "In light of a recent federal court order, reporting companies are not currently required to file beneficial ownership information with FinCEN and are not subject to liability if they fail to do so while the order remains in force."
As we previously noted, the injunction issued on December 3, 2024 is a preliminary measure, and further legal proceedings may alter this order or impact the enforcement of the CTA. We are closely monitoring the situation and will provide further updates as new information becomes available.
If you have questions or would like assistance, please contact a member of your Steptoe legal team or email us at CTA@steptoe.com.
