A nationwide injunction preventing enforcement of the Corporate Transparency Act is still in place… but for how long?
Drama Continues
Last we tuned in, the Fifth Circuit Court of Appeals granted a stay on December 23, 2024 in Texas Top Cop Shop, Inc. et al. v. Garland et al., temporarily allowing enforcement of reporting of beneficial ownership of companies under the Corporate Transparency Act (the "CTA"). However, on December 26 the Fifth Circuit vacated the stay in that case, reinstating the injunction and once again pausing enforcement, not to mention giving an entire country whiplash.
The legal battle escalated when the U.S. Department of Justice appealed to the U.S. Supreme Court, seeking to lift the injunction. On January 23, 2025, the Supreme Court ruled in favor of the government, allowing the CTA to be enforced while the Fifth Circuit continues to review the case. However, during the Supreme Court review, another nationwide injunction was granted in Smith et al. v. U.S. Department of Treasury. The U.S. Department of Justice, under the new administration, filed an appeal in Smith, asking for a similar stay of the injunction from the Fifth Circuit as in Texas Top Cop Shop.
Legislative Efforts to Repeal the CTA
While the courts continue to deliberate, lawmakers have introduced bills to repeal the CTA altogether. On January 15, 2025, Senator Tommy Tuberville (R-AL) and Congressman Warren Davidson (R-OH) reintroduced legislation aimed at the law, entitled the "Repealing the Big Brother Overreach Act", on the basis that the CTA imposes excessive burdens on small businesses and infringes on privacy rights.
What This Means for You
As of today, the CTA remains unenforceable under the nationwide injunction and the Financial Crimes Enforcement Network ("FinCEN") has confirmed that businesses are not currently required to report beneficial ownership information and will not face liability for failing to do so while the injunction remains in place. Should the injunction be lifted, there is a possibility that FinCEN will allow a 30-day extension for businesses to submit their filings.
Given the ongoing legal and legislative battles, this situation remains fluid. Businesses should stay informed about developments and be prepared for potential compliance obligations if the injunction is lifted before legislation is passed. JH Legal is here to answer any questions you may have.
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