Legal Bulletins
Corporate Transparency Act Injunction: Fifth Circuit Vacates Stay – BOI Reporting Back on Hold
Update: Fifth Circuit Reinstates CTA Injunction, BOI Reporting Paused
On December 26, 2024, the United States Court of Appeals for the Fifth Circuit reversed its prior decision of December 23 and allowed the injunction against enforcement of the Corporate Transparency Act (CTA) to stand.
History: We previously alerted you that enforcement of the CTA, which obligates certain companies to file Beneficial Ownership Information Reports (BOIR) regarding their beneficial owners, was enjoined by a U.S. District Court in Texas on December 3, 2024 (Texas Top Cop Shop, Inc. v. Garland, No. 4:24-CV-478, 2024 WL 5049220 (E.D. Tex. Dec. 5, 2024)). Following the District Court’s ruling, the Financial Crimes Enforcement Network (FinCEN) published an alert on its BOI E-Filing System webpage recognizing the court order and stating that reporting companies are not currently required to file a BOIR and are not subject to liability if they fail to do so while the applicable order remains in force. FinCEN also noted that reporting companies may still opt to file a BOIR. The government appealed the decision and requested that the injunction be lifted, and on December 23, 2024, a motions panel of the U.S. Court of Appeals for the Fifth Circuit granted the government’s emergency motion (Texas Top Cop Shop, Inc. v. Garland, No. 24-40792, 2024 WL 5203138 (5th Cir. Dec. 23, 2024)). Following the Fifth Circuit’s ruling, FinCEN stated on its BOI webpage (https://fincen.gov/boi) that reporting companies (other than companies that qualify for disaster relief) are once again required to file beneficial ownership information with FinCEN. FinCEN did, however, recognize that reporting companies may need additional time to comply given the period the preliminary injunction was in effect, and extended the filing deadlines (please see our December 24, 2024 bulletin for information on the extended filing deadlines).
Current Ruling: On December 26, 2024, the Fifth Circuit Court of Appeals vacated its December 23, 2024 order granting the government’s motion to lift the injunction (Texas Top Cop Shop, Inc. v. Garland, No. 24-40792 (5th Cir. Dec. 26, 2024)). As a result, FinCEN is yet again enjoined from enforcing the CTA. The Fifth Circuit’s order stated that the government’s appeal has been expedited.
Based on these events, we reiterate our earlier recommendation that reporting companies that have not yet filed a BOIR with FinCEN continue to collect the necessary information from their beneficial owners so that, in the event the injunction is lifted, a BOIR can be filed quickly.
We will continue to monitor this closely and provide updates as they become available. For more information concerning the CTA and its reporting requirements, please contact James McKittrick or Michele Walsh.
James J. McKittrick, Jr.
410-576-4134 • jmckittrick@gfrlaw.com
Michele Bresnick Walsh
410-576-4216 • mwalsh@gfrlaw.com