For some attorneys, the last week and a half of 2024 was an opportunity for a bit of R & R before resuming customary work activities. Alas, that was not the case for attorneys at FinCEN and the Department of Justice, who were required to deal with a favorable Fifth Circuit ruling on December 23 staying the nationwide injunction issued by the federal District Court for the Eastern District of Texas against the beneficial ownership (“BOI”) reporting requirements of the CTA, only to be followed on December 26 by an entirely opposite order from a different panel of Fifth Circuit judges reinstating the nationwide injunction. While FinCEN responded to the December 26 reinstatement of the nationwide injunction by indicating on its website that compliance with the reporting requirements of the CTA were suspended while the injunction remains in effect, on December 31 the Department of Justice asked the Supreme Court to stay the nationwide injunction while the appeal to the Fifth Circuit is pending and allow FinCEN to resume enforcement activities.
As we have indicated in earlier law alerts on this topic (listed and linked to below), the constitutional issues presented are complex ones, and we cannot predict what the response of the Supreme Court will be to the Department of Justice’s request to revive the stay on the injunction. However, if on the merits of the appeal, the Fifth Circuit were to hold that the CTA was unconstitutional, it is likely that the Supreme Court would grant certiorari to review the lower court decision. The issue is currently pending before three other circuit courts of appeal, and in the event that a split between the circuit courts on the constitutionality of the CTA arises, the likelihood that the Supreme Court would grant certiorari would certainly increase.
From a compliance perspective, a conservative position to take would be to be prepared for the possibility that the Supreme Court will stay the nationwide injunction and allow FinCEN to enforce the CTA’s provisions. So, for those entities covered by the CTA that have thus far been rolling the dice and still not filed a BOI report with FinCEN, they might be wise to consider organizing the necessary information in preparation for submission in the event submission does become required. That does not mean that filing will be necessary prior to action by the Supreme Court, only that one should prepare for that contingency.
We will continue to keep you advised of further developments in this legal ping-pong match.
Prior Law Alerts on this Topic:
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
