On January 23, 2025, the U.S. Supreme Court granted a stay of the preliminary injunction against the enforcement of the Corporate Transparency Act (“CTA”). However, in the meantime, on January 7, 2025, another Texas district court has also issued a separate nationwide injunction against the enforcement of the CTA. As a result, the U.S. Treasury Department’s Financial Crimes Enforcement Network (“FinCEN”) published an alert on January 24, 2025, confirming that it will not require reporting companies to file Beneficial Ownership Information (“BOI”) reports while this second injunction remains in place.
How Did We Get Here?
The CTA is designed to prevent “malign actors” from committing various undesirable activities such as money laundering, financing terrorism or tax fraud. The CTA requires reporting companies to prepare and file BOI reports with FinCEN. Among other things, these BOI reports require disclosure of the reporting company’s “beneficial owners,” who are defined as individuals that own at least a 25% interest of the company and/or exercise substantial control over the company.
On December 3, 2024, a district court in Texas issued a nationwide preliminary injunction against the enforcement of the CTA, arguing that it was unconstitutional under Texas Top Cop Shop, Inc. v McHenry. The U.S. government appealed the injunction. The Fifth Circuit Court of Appeals first issued a stay and then reversed course and upheld the injunction on December 26, 2024. Finally, as noted above, the U.S. Supreme Court stayed the nationwide injunction on January 23, 2025.
On January 7, 2025, a separate district court in Texas issued a nationwide injunction against the enforcement of the CTA under Smith v U.S. Department of the Treasury.
What’s Next?
The government has not yet appealed the Smith injunction. The Texas Top Cop Shop, Inc. injunction is stayed pending a decision by the Fifth Circuit Court of Appeals, which will begin hearing arguments on March 25, 2025. Reporting companies should gather materials necessary to file BOI reports and comply with the CTA, should the need to quickly comply arise. Please contact one of our CTA committee members, Howard Davis, Aylin Daldal or Gary Kan, for assistance or questions.
