ALERT: Fifth Circuit Reinstates Injunction

In 2021, Congress passed the Corporate Transparency Act (the “CTA”), a portion of which went into effect in 2024, requiring most businesses to report their ownership structure and owner identities in an effort to combat fraud and money laundering. On December 3, 2024, the U.S. District Court for the Eastern District of Texas issued a preliminary injunction in favor of the plaintiffs in the case of Texas Top Cop Shop, Inc. et al. vs. Garland (U.S. Attorney General), enjoining enforcement of the CTA. 

Shortly thereafter, the Government appealed the decision, and on December 23, 2024, a three-judge panel lifted the injunction issued by the Texas district court. The Fifth Circuit panel justified its reversal by stating the Department of Justice “made a strong showing that it is likely to succeed on the merits in defending CTA’s ‘constitutionality.’” FinCen updated its website establishing a new reporting deadline of January 13, 2025, to account for any delays in reporting caused by the injunction.

However, on December 26, 2024, the full Fifth Circuit Court reversed the three-judge panel, reinstated the injunction, and again halted enforcement of the CTA nationwide, pending merit review. Therefore, all reporting companies are relieved of filing Beneficial Ownership Information filing obligations and FinCEN’s new January 2025 deadline is not enforceable.

While enforcement of the reporting requirements is suspended, the reporting requirements and deadlines can change quickly as the courts continue to work through the substantive issues in the case.  Therefore, if you have not already reported your Beneficial Ownership Information to FinCen, please be vigilant, as the reporting deadlines could be reinstated with short notice. 

We will continue to monitor the situation and provide updates as they become available.

Happy New Year!