As we reported in a previous client alert, the U.S. District Court for the Eastern District of Texas issued a nationwide preliminary injunction on December 3, 2024 to stop the Federal government from enforcing the Corporate Transparency Act (the “CTA”) and the regulations implemented under the CTA. The case is captioned as Texas Top Cop Shop, Inc. et al. v. Garland, et al. The government promptly appealed this ruling to the United States Court of Appeals for the Fifth Circuit, which issued an order on December 23rd to stay the injunction (simply put, to reinstate the CTA’s filing requirements). Perhaps in response to this order the Financial Crimes Enforcement Network (FinCEN), the agency charged with enforcing the CTA, extended the filing deadline for companies formed prior to 2024 to January 13, 2025. In a surprising development, a different panel of the Fifth Circuit issued an order on December 26th setting aside the court’s December 23rd order. The Court also scheduled a hearing on the merits of the government’s initial appeal of the District Court order for late March. FinCEN issued a press release on December 28th confirming that the Texas Top Cop Shop injunction remains in effect and that reporting companies are not currently required to file beneficial ownership reports (although voluntary reports are being accepted on the FinCEN website).

What does all of this mean for you? For the moment, reporting companies are not required to file beneficial owner reports and that seems unlikely to change until late March. On December 31st, however, the government filed an application with the United States Supreme Court to lift the injunction (i.e., reinstate the CTA’s filing requirements) pending the outcome of the Fifth Circuit decision, so that timeline may change. As noted in our earlier alert, it is unclear whether FinCEN will provide a grace period or forgo imposing penalties for filings made if the injunction is lifted and the CTA is reinstated. Criminal penalties are severe and include fines of up to $10,000 and/or prison terms of up to two years. FinCEN may also impose civil penalties of up to $591 per day for failure to file. Reporting companies will have to weigh the risks of not filing their beneficial owner reports against the burden of filing those reports.

For more on the Corporate Transparency Act, please visit our website.