/>iOn January 23, 2025, the United States Supreme Court granted the government’s application for stay of a recent district court’s preliminary injunction of the enforcement of the Corporate Transparency Act (CTA). With that being said, a separate district court order enjoining enforcement of the CTA remains in effect. Despite the Supreme Court’s decision, FinCEN has confirmed that reporting companies are not currently required to file beneficial ownership information and are not subject to liability if they fail to do so while the separate order remains in force.
For additional background information, please see our prior CTA alerts here.
Background
On December 3, 2024, a federal judge in the U.S. District Court for the Eastern District of Texas issued a nationwide preliminary injunction suspending enforcement of the CTA in Texas Top Cop Shop.[1] Shortly after, the government appealed and sought an emergency stay of the injunction. While the United States Court of Appeals for the Fifth Circuit initially granted the stay on December 23, the Fifth Circuit vacated the stay three days later, making the CTA unenforceable.
Following the Fifth Circuit’s decision, the government filed an application for stay of the nationwide injunction in the United States Supreme Court. On January 23, the Supreme Court granted the government’s application and lifted the injunction, pending the disposition of the appeal in the Fifth Circuit (making the CTA enforceable while the case is appealed).[2]
With that being said, on January 7, another district judge in the Eastern District of Texas issued a nationwide preliminary injunction in Smith v. U.S. Department of Treasury, a new case challenging enforcement of the CTA.[3] This separate injunction remains in effect, as the Supreme Court’s January 23 ruling operates only in relation to the Texas Top Cop Shop order. Although the government has yet to appeal the Smith decision, other district court challenges to the CTA remain on appeal. For example, in a case brought in the U.S. District Court for the Northern District of Alabama, the court held that the CTA exceeds Congress’ enumerated powers and is, therefore, unconstitutional.[4] This case is currently on appeal in the United States Court of Appeals for the Eleventh Circuit.
FinCEN issued an instructive alert on January 24 confirming that reporting companies are not required to file beneficial ownership information reports with FinCEN, despite the Supreme Court’s recent action.[5] The alert noted the separate nationwide order issued in Smith and provided that companies are not subject to liability for failing to file beneficial ownership information reports while the Smith order is effective.
Status of the CTA and Implications for Reporting Companies
The status and enforcement of the CTA remain unclear, pending resolution of the appeal in the Fifth Circuit. The Fifth Circuit’s brief deadline is February 28, and the oral argument is set for March 25. A decision is expected soon after oral argument. But, depending on the outcome, a petition for a writ of certiorari may be sought, and the Supreme Court may hear the case. Under all circumstances, we anticipate developments in the coming months.
It is also unclear what position the new Trump administration will take on the CTA—whether the Administration will choose to not enforce it, or rather take additional steps to defend it.
In the meantime, entities that may be subject to the CTA should continue to closely monitor for updates and be prepared to file beneficial ownership information reports, if necessary, on short notice. While filing is not currently required, voluntary submission remains available.
For additional information on filing, see our prior alert here.
[1] Texas Top Cop Shop, Inc. et al. v. Garland et al., No. 4:24-CV-478, Dkt. 30 (E.D. Tex. Dec. 3, 2024).
[2] Order, Henry v. Top Cop Shop, Inc., No. 24A653 (U.S. Supreme Court Jan. 23, 2025).
[3] Smith v. U.S. Dep’t of Treasury, No. 6:24-cv-00336-JDK, Dkt. 30 at 33-34 (E.D. Tex. Jan. 7, 2025).
[4] National Small Business United et al. v. Yellen et al., No. 5:22-cv-01448 (N.D. Ala. 2022).
