UPDATE: Corporate Transparency Act – Nationwide Preliminary Injunction Has Been Appealed by the Federal Government

By: Robyn H. Drucker and David M. Levine

On December 3, 2024, the U.S. District Court for the Eastern District of Texas (the “Court”) issued a nationwide preliminary injunction temporarily barring enforcement of the Corporate Transparency Act (31 U.S.C. § 5336) (the “CTA”) and the Reporting Rule (31 C.F.R. 1010.380) nationwide. This afternoon, the Federal Government (Merrick Garland, Attorney General of the United States, et al.,) has filed its Notice of Appeal. Until that appeal is heard, the nationwide preliminary injunction remains in effect.

The Preliminary Injunction

In Texas Top Cop Shop, Inc. et al. v. Garland, Judge Amos Mazzant found: 

 [T]he CTA, 31 U.S.C. § 5336 is hereby enjoined. Enforcement of the Reporting Rule, 31 C.F.R. 1010.380 is also hereby enjoined, and the compliance deadline is stayed under § 705 of the APA [Administrative Procedures Act]. Neither may be enforced, and reporting companies need not comply with the CTA’s January 1, 2025, BOI [Beneficial Ownership Information] reporting deadline pending further order of the Court.  

The preliminary injunction is a temporary order barring nationwide enforcement of the CTA and the Reporting Rule and specifically references a suspension of the January 1, 2025 filing deadline for BOI Reports for Reporting Companies in existence prior to January 1, 2024 while the case is litigated.

The Government’s Appeal 

The government has appealed the Court’s decision to the U.S. Court of Appeals for the Fifth Circuit, which, once the appeal is heard, may result in a stay of the preliminary injunction, resulting in reinstatement of the CTA and the Reporting Rule, including the January 1, 2025 BOI Report filing deadline. 

 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. 

Under the CTA, the following filing deadlines apply to all Reporting Companies:

• A Reporting Company created or registered to do business before January 1, 2024 must file an initial BOI Report on or before January 1, 2025.
• A Reporting Company created or registered on or after January 1, 2024 and before January 1, 2025 has 90 calendar days after it is created to file an initial BOI report.
• A Reporting Company created after January 1, 2025 has 30 calendar days from actual or public notice that the Company’s creation or registration is effective to file an initial BOI report.

Takeaways

As the federal government has now appealed the lower court’s preliminary injunction, but the appeal has not yet been argued in court, Reporting Companies should understand that the CTA, the Reporting Rule (including all applicable deadlines therein) and the January 1, 2025 filing deadline could all be reinstated before the end of 2024 or in early 2025. 

Accordingly, Reporting Companies should continue to prepare for CTA reporting, including collecting all information required for BOI Reports and FinCEN identifiers for beneficial owners.  They should also continue to monitor the status of the Texas case and all CTA related litigation and guidance.  It should be noted that to date, FinCEN is still accepting filings, should a Reporting Company find it prudent to make a filing during the pendency of the preliminary injunction.

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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