UPDATE:  Corporate Transparency Act - Preliminary Injunction REINSTATED

By: Robyn H. Drucker and David M. Levine

The saga continues…

On December 26, 2024, the 5^th Circuit Court of Appeals merits panel issued an order reinstating the nationwide preliminary injunction barring enforcement of the Corporate Transparency Act (the “CTA”) and the Reporting Rule issued by the Eastern District of Texas Court in Texas Top Cop Shop, inc. et al v. Garland.  Notably, this is the same Federal Court of Appeals that lifted the same preliminary injunction just a few days ago.

On December 27, 2024, FinCEN issued an alert responding to the Court’s order (and appears to have updated its December 24, 2024 alert), concluding:

“…[A]s of December 26, 2024, the injunction issued by the district court in Texas Top Cop Shop, Inc. v. Garland is in effect and reporting companies are not currently required to file beneficial ownership information with FinCEN.”

Reporting Companies are therefore again advised that CTA filings are not required during the pendency of the preliminary injunction.  Reporting Companies should continue to monitor all CTA related litigation and to prepare for CTA reporting, including collecting all information required for BOI Reports, as the status of the injunction may change in the future.  It should be noted that to date, FinCEN is still accepting filings, should a Reporting Company find it prudent to make a voluntary filing during the pendency of the preliminary injunction.

Background

As discussed in Cohen and Wolf’s prior client updates, effective as of January 1, 2024, the Corporate Transparency Act (the “CTA”) and the rules issued thereunder by the Financial Crimes Enforcement Network (“FinCEN”) required most U.S. entities and foreign entities registered to do business in the United States (“Reporting Companies”) to file reports with FinCEN (“BOI Reports”) disclosing information about the Reporting Company and its beneficial owners prior to reporting deadlines. 

On December 3, 2024, in Texas Top Cop Shop, Inc. et al. v. Garland, Judge Amos Mazzant issued a  preliminary injunction, which was a temporary order barring nationwide enforcement of the CTA and the Reporting Rule. The decision specifically referenced a suspension of the filing deadline for BOI Reports for Reporting Companies in existence prior to January 1, 2024. 

The Federal Government appealed the Texas Top Cop Shop decision to the 5^th Circuit Court of Appeals and filed an emergency motion seeking a stay of the nationwide injunction pending the outcome of the appeal. On December 23, 2024, the 5^th Circuit ruled on the emergency motion in favor of the Federal Government, finding that the preliminary injunction had been lifted and expediting the appeal for oral argument.  

On December 26, 2024, the 5^th Circuit Court of Appeals vacated the same court’s order granting the stay of the preliminary injunction, thereby reinstating the preliminary injunction enjoining enforcement of the CTA and the Reporting Rule issued by the lower Texas Court.

 Cohen and Wolf’s  Business & Corporate and Tax attorneys will continue to monitor developments concerning the CTA and will provide updates as they become available.   Please do not hesitate to contact us, should you have any questions.   

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