CTA Reporting Requirements Blocked Again

It’s hard to keep track of the status of reporting obligations under the Corporate Transparency Act (CTA) these days, but in a second ruling during the holiday week, a court blocked the filing requirement again. Here is the latest on the back and forth:

• On December 23, 2024, a panel of the U.S. Court of Appeals for the Fifth Circuit (the Fifth Circuit) granted a stay of the nationwide preliminary injunction against enforcement of the CTA, and its beneficial ownership information (BOI) reporting requirements, entered in the case of Texas Top Cop Shop, Inc. v. Garland, pending the outcome of the Department of the Treasury’s ongoing appeal. FinCEN immediately thereafter issued an alert notifying the public of this ruling, and recognizing that reporting companies may have needed additional time to comply with BOI reporting requirements, FinCEN extended reporting deadlines.
• On December 26, 2024, however, just three days later, a different panel of the Fifth Circuit issued an order vacating the Court’s December 23, 2024 order granting a stay of the preliminary injunction. Accordingly, as of December 26, 2024, the nationwide preliminary injunction issued by the district court in Texas Top Cop Shop, Inc. v. Garland is back in effect. The reinstated injunction halts enforcement until the appeals court reaches a decision on the merits of the underlying case.

Needless to say, these ongoing developments surrounding the CTA could make any person’s head spin. But the bottom line is that FinCEN has confirmed, for now, that “reporting companies are not currently required to file beneficial ownership information with FinCEN and are not subject to liability if they fail to do so while the order remains in force.” Reporting companies may continue to voluntarily submit BOI reports if they choose to do so.

Similar to when the nationwide preliminary injunction was first issued, businesses should monitor further developments, evaluate compliance plans, be prepared to resume compliance efforts if the injunction is lifted again, and consider a voluntary filing of their BOI to FinCEN by the extended reporting deadlines. A voluntary filing would relieve businesses from having to worry about further rapid changes arising out of the ongoing litigation in the Fifth Circuit or elsewhere in the country. Even if you choose not to make a voluntary filing, it would be a good idea to complete your CTA analysis and gather the information necessary to file now so you can be prepared if the rules change yet again.

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