Update on Corporate Transparency Act Following Latest Court Decision

As of December 26, 2024, the U.S. Court of Appeals for the Fifth Circuit vacated its prior order staying the nationwide injunction against the Corporate Transparency Act (CTA). This means that enforcement of the CTA is once again on hold, pending further developments. Yesterday’s alert regarding reporting obligations and deadlines is no longer applicable.

The epic game of ping pong regarding the enforcement of the Corporate Transparency Act (the “CTA”) continues with the ball most likely landing back on the “no enforcement” side of the net.

To recap recent developments, on December 3, 2024, the U.S. District Court for the Eastern District of Texas, Sherman Division, issued an order granting a preliminary injunction finding that the CTA is likely unconstitutional and prohibiting the enforcement of the CTA on a nationwide basis.  The Financial Crimes Enforcement Network (“FinCEN”), an agency of the Department of the Treasury that is responsible for enforcement of the CTA, initially confirmed that it was complying with the injunction and that all filing obligations were suspended, while simultaneously appealing the district court’s order. On December 23, 2024, a three-judge panel of the U.S. Court of Appeals for the Fifth Circuit stayed the nationwide injunction pending the outcome of FinCEN’s appeal. Then, on December 26, 2024, the full Fifth Circuit vacated the portion of its earlier order that stayed the district court’s preliminary injunction. The full order of the Fifth Circuit is available here.

While FinCEN has yet to issue a response to this latest Fifth Circuit order, we anticipate that FinCEN will respect the injunction in the same way that it initially respected the district court’s December 3, 2024 order, and confirm that there is once again no obligation for any reporting company to file beneficial ownership information reports under the CTA. If FinCEN formally responds, we expect that response to be posted on FinCEN’s website.

Please reach out to your Stoel Rives contact if you have any questions or need assistance.