In the most recent installment of the soap-opera-like saga that has unfolded around the Corporate Transparency Act (CTA), the U.S. Supreme Court has issued a stay of the injunction preventing enforcement of the CTA’s provisions. For those keeping score, this represents at least a temporary win for the Department of Justice and the Financial Crimes Enforcement Network (“FinCEN”), on the heels of the December 26 loss to those government agencies, handed down by a Fifth Circuit Court of Appeals panel that reinstituted the injunction previously overturned by a separate panel of judges in the same court.
The preliminary injunction, issued by the District Court for the Eastern District of Texas on December 3, 2024, in the case of Texas Top Shop, Inc. v. Garland, prohibited enforcement of the CTA and its beneficial ownership interest (“BOI”) reporting rule on the grounds of violations of the Constitution’s Ninth and Tenth Amendments, exceeding Congressional power under the Commerce Clause, Taxing Power, and Necessary and Proper Clauses. (Texas Top Shop had alleged other constitutional violations, but the District Court did not address them in its decision). The CTA requires covered companies to report information about the individuals who, directly or indirectly, own or control at least 25% of the company, or exercise substantial control over the company. More detailed information about the BOI reporting rule may be found in our Law Alert here.
In its brief opinion, the Supreme Court, Justice Alito opining for the majority, simply stated that the stay of the injunction would remain in place pending the outcome of a ruling by the Fifth Circuit on the merits of the case or the outcome of a petition for a writ of certiorari, should one be timely sought. Justice Gorsuch, in his concurring opinion, indicated that he would support the Court taking on the case now to determine whether the District Court was within its authority to issue a nationwide injunction in the first place. In her dissenting opinion, Justice Jackson stated that she would not have issued the stay and would have let the appellate process take its course as the government did not, in her opinion, show any exigent circumstances warranting the emergency relief granted by the majority. She pointed to the four-year delay between the enactment of the CTA and the deadline for BOI compliance as evidence that a further delay would not likely result in any additional harm pending the Appeals Court decision on the merits.
As of the writing of this Alert, FinCEN has not yet issued guidance on a new deadline for complying with the CTA’s BOI reporting requirement in light of the Supreme Court’s stay. FinCEN’s most recent update, from January 2, in the wake of the December 26 resurrection of the injunction, indicated that businesses are not required to submit the BOI “while the order remains in force.” Consequently, and in consideration of the significant penalties that come with non-compliance, the safest course of action for those companies who have not yet completed the beneficial ownership form would be to do so as soon as possible. The more daring should, at the very least, be checking the FinCEN website for updates on a new compliance deadline.
Prior Law Alerts on this Topic:
No Rest for the Weary: Department of Justice asks Supreme Court to Issue a Stay of Nationwide Injunction Against Corporate Transparency Act (CTA) – January 2, 2025
Pencils Down: Corporate Transparency Act (CTA) Injunction Back in Effect – December 27, 2024
Fifth Circuit Court of Appeals Lifts Nationwide Preliminary Injunction Against Enforcement of Corporate Transparency Act Pending Ruling on the Merits – December 24, 2024
Texas District Court Issues Nationwide Preliminary Injunction Against Enforcement of Corporate Transparency Act (CTA) – December 4, 2024
FinCEN Beneficial Ownership Reporting Requirements Due by Year End for Many Organizations – November 18, 2024