CTA Update: U.S. Government Appeals Injunction & FinCEN Issues Guidance

Amid the ongoing legal battle over the Corporate Transparency Act (the “CTA”), updates continue to roll in. On December 5, 2024, the U.S. government filed a notice of appeal to the U.S. Court of Appeals for the Fifth Circuit (the “Fifth Circuit”) from the decision of the U.S. District Court for the Eastern District of Texas (the “Court”) to enjoin the CTA.

Background

The CTA has made headlines this month as the January 1, 2025, deadline for most reporting companies to file beneficial ownership information (a “BOI Report”) was quickly approaching. However, on December 3, 2024, the Court delivered a major rebuke of the CTA, granting a nationwide injunction of the CTA and its reporting rules, and holding that it is “likely unconstitutional as outside of Congress’s power” in the case Texas Top Cop Shop Inc. et al. v. Garland et al.

FinCEN’s Statement

Following the Court’s decision, the Financial Crimes Enforcement Network (“FinCEN”) issued a statement that it plans to comply with the injunction and will not enforce the CTA so long as it stands. FinCEN confirmed that “reporting companies are not currently required to file their beneficial ownership information with FinCEN and will not be subject to liability if they fail to do so while the preliminary injunction remains in effect”. Importantly, FinCEN’s statement interprets the Court’s order as “stay[ing] all deadlines to comply with the CTA’s reporting requirements,” meaning that reporting companies formed both before and after January 1, 2024, do not have reporting obligations under the CTA at the present time.

Next Steps

Though FinCEN’s guidance allows reporting companies to breathe a sigh of relief for now, they should keep the CTA closely on their radar. Following the U.S. government’s appeal of the Court decision, the Fifth Circuit may overturn the injunction and reinstate reporting companies’ obligations under the CTA. While reporting companies are not currently obligated to file BOI Reports, they should consider preparing to do so in case enforcement of the CTA resumes.