We recently reported that on December 3, 2024, the U.S. District Court for the Eastern District of Texas (Sherman Division), issued a preliminary injunction (the “Preliminary Injunction”) in Texas Top Cop Shop, Inc., et al. v. Garland, et al., Case No. 4:24-cv-478 (E.D. Tex.) which temporarily blocked enforcement of the Corporate Transparency Act (the “CTA”), the federal law that came into effect on January 1, 2024.  Background information on the CTA can be found in our previous letters to clients, available here and here. 

On December 23, 2024, the US Court of Appeals for the Fifth Circuit issued a stay order (the “Order”) pending appeal of the Preliminary Injunction. Following the Order from the appellate court, any entity that is not exempt from the reporting obligations under the CTA was required once again to file its BOI report before the US Department of the Treasury’s Financial Crimes Enforcement Network (“FinCEN”). Pursuant to the Order, the reporting entities were to file their BOI report by certain extended reporting deadlines that had been published by FinCEN on a statement on its website, the earliest of which was a January 13, 2025 deadline.

While we were drafting the summary of this update for our clients, on December 26, 2024, three days after the issuance of the Order by the Court of Appeals for the Fifth Circuit, a different panel of the U.S. Court of Appeals for the Fifth Circuit issued an order vacating the Court’s Order. Accordingly, as of December 26, 2024, the Preliminary Injunction is back in effect and reporting companies are not currently required to file beneficial ownership information with FinCEN.

Please bear in mind that there is no definitive judgment yet on the constitutionality of the CTA from either the US District Court for the Eastern District of Texas or the Fifth Circuit. It is still possible that challenges to the CTA ultimately may change or invalidate all or part of the CTA’s reporting requirements. While reporting entities do not need to file their BOI reports with FinCEN at this time, they should be prepared to file their reports on a fairly short timeframe if such obligation is once again reinstated. We will continue to monitor the situation and keep you posted on additional developments on this matter.

Please note that this letter is sent for informational purposes only and does not constitute legal advice.

If you have any questions regarding the CTA or this letter, please don’t hesitate in contacting our office at (281) 367-2222 or acasas@stibbsco.com.

On December 3, 2024, the U.S. District Court for the Eastern District of Texas (Sherman Division), issued a preliminary injunction (the “Preliminary Injunction”) in Texas Top Cop Shop, Inc., et al. v. Garland, et al., Case No. 4:24-cv-478 (E.D. Tex.) enjoining the application of the Corporate Transparency Act (the “CTA”), the federal law that came into effect on January 1, 2024.  Background information on the CTA can be found in our previous letters to clients, available here and here.  We recently sent our clients a reminder of the deadline for any entity that was created or registered before January 1, 2024, and which is not exempt from the reporting obligations under the CTA, to file its BOI report before the US Department of the Treasury’s Financial Crimes Enforcement Network (“FinCEN”) not later than December 31, 2024.  We have also reminded our clients that entities formed in 2024 have a 90-day period from the date of registration to file the BOI report, which term is reduced to 30 days for entities formed from January 1, 2025 onwards.

The obligation to file a BOI report by the abovementioned deadlines is affected by the recent Preliminary Injunction. While the Court has not affirmatively found the CTA to be contrary to law or unconstitutional, it found the CTA to be likely unconstitutional and stated

[T]he CTA, 31 U.S.C. § 5336 is hereby enjoined. Enforcement of the Reporting Rule, 31 C.F.R. 1010.380 is also hereby enjoined, and the compliance deadline is stayed under § 705 of the APA. Neither may be enforced, and reporting companies need not comply with the CTA’s January 1, 2025, BOI reporting deadline pending further order of the Court (emphasis added).

Accordingly, FinCEN cannot enforce any penalties for failure to comply with the deadlines set forth in the CTA. In light of the Preliminary Injunction, entities may still opt to voluntarily file their BOI report or may refrain from filing such BOI report until there is further action from the courts or legislature.  We will continue to provide updates to our clients on any developments in connection with the applicability of the CTA.

Please note that this letter is sent for informational purposes only and does not constitute legal advice.

If you have any questions regarding the CTA or this letter, please don’t hesitate in contacting our office at (281) 367-2222 or acasas@stibbsco.com.