The Off Again – On Again – Off Again World of Corporate Transparency Act Compliance
If you are a business owner and have followed the news lately about the Corporate Transparency Act (CTA), you know that what we don’t know is a lot more than what we do know. The CTA is part of the Anti-Money Laundering Act of 2020 and was the culmination of more than a decade of congressional efforts to implement beneficial ownership reporting requirements for business entities. The CTA requires non-exempt entities to file a Beneficial Ownership Information Report (BOIR) disclosing beneficial owners and other required information to the Financial Crimes Enforcement Network (FinCEN) of the Department of Treasury.
For entities in existence on or before January 1, 2024, that deadline was January 1, 2025. For entities created after January 1, 2024 but prior to January 1, 2025 that deadline is 90 days after the earlier of: 1) receipt of actual notice of formation or registration from a secretary of state or similar office; and 2) the date on which a secretary of state or similar office first provides public notice of formation or registration. For companies formed on or after January 1, 2025 that deadline is reduced to 30 days.
Those were the rules we were all operating under until December 3, 2024. On that day, U.S. District Court for the Eastern District of Texas granted a preliminary injunction in favor of the Plaintiffs in the case of Texas Top Cop Shop, et al. v. Garland, et al. While there had been other federal district courts that had issued injunctions in similar cases (and some that refused) this one was different in that it was applied nationwide to all businesses, not just the parties to this case. The government immediately appealed the order to the Fifth Circuit Court of Appeals and requested that the District Court stay its order pending that appeal. The request was denied. On December 23, 2024, a three judge panel of the Fifth Circuit found that the government had met its burden to show that the nationwide injunction was inappropriate and stayed the injunction. At that point, it appeared that BOIRs were again mandatory and needed to be timely filed with a brief extension granted by FinCEN to account for the injunction.
However, on December 24, 2024 the Plaintiffs asked for an emergency re-hearing by the Fifth Circuit, en banc. This meant all judges from the Fifth Circuit would weigh in, not just the three judge panel. This time, late in the evening of December 26, 2024, the stay of the injunction was lifted by the Court of Appeals meaning that FinCEN could no longer enforce the CTA until the matter was finally decided. Oral arguments where scheduled in the matter for March 25, 2025.
On December 31, 2024, the government applied to the United States Supreme Court to again stay the order of the District Court. On January 3, 2025, Justice Alito acting on behalf of the Supreme Court established a deadline of 4:00 p.m. on Friday, January 10, 2025 for the Plaintiffs to respond to the government’s application.
Based on this timeline, a decision could come quickly following that deadline. If you have not yet filed a BOIR that would otherwise have been due or become due but for the injunction, it is strongly recommended that you monitor these proceedings closely and prepare to act quickly in response to any changes in compliance obligations.
This post is for informational purposes only and not for the purpose of providing legal advice. You should contact an attorney to obtain advice with respect to any particular issue or problem. Nothing herein creates an attorney-client relationship between Hallock & Hallock and the reader.