Corporate Transparency Act

CTA NATIONAL UPDATE: FinCEN Announces Beneficial Ownership Reporting Requirements Remain Paused

Updated January 24, 2025, 12 PM EST

On Jan. 23, the U.S. Supreme Court granted the government’s motion to stay a nationwide injunction halting enforcement of the Corporate Transparency Act in Texas Top Cop Shop, Inc. v. McHenry—formerly, Texas Top Cop Shop v. Garland).

A separate nationwide order issued by a different federal judge in Texas (Smith v. U.S. Department of the Treasury) still remains in place. 

As a result of these disparate decisions, reporting companies are not currently required to file beneficial ownership information with the Financial Crimes Enforcement Network despite the high court’s action in Texas Top Cop Shop. Reporting companies also are not subject to liability if they fail to file this information while the Smith order remains in force. However, reporting companies may continue to voluntarily submit beneficial ownership information reports. 

On Jan. 24, FinCEN issued the following guidance, “in light of the recent federal court order, reporting companies are not currently required to file beneficial ownership information with FinCEN and are not subject to liability if they fail to do so while the order remains in force. However, reporting companies may continue to voluntarily submit beneficial ownership information reports.” 

According to FinCEN, and as of 12 PM EST on January 24^th, this means that reporting requirements under the Corporate Transparency Act continue to be paused for corporations and nonprofits including applicable community associations.  

CAI continues to track movements in the federal courts over challenges regarding the Corporate Transparency Act and has contacted the United States Department of Treasury, urging an administrative delay be issued due to the chaos and confusion created by these recent court rulings and Congress’ deciding not to take legislative action to extend the filing deadline.

On Dec. 3, the U.S. District Court for the Eastern District of Texas published a decision in the matter of Texas Top Cop Shop, Inc., et al. v. Garland, et al. issuing a preliminary nationwide injunction against the CTA. The court granted Plaintiff’s request for a preliminary injunction, blocking the U.S. Department of Treasury from enforcing the act’s beneficial ownership information (BOI) reporting requirements.

The court granted Plaintiff’s request for a preliminary injunction, blocking the U.S. Department of Treasury from enforcing the act’s beneficial ownership information reporting requirements. This injunction has since been stayed.

In his opinion, Judge Amos L. Mazzant III grants the plaintiff’s request to preliminarily enjoin the government from enforcing the Corporate Transparency Act and its implementing regulations, ruling that “Neither may be enforced, and reporting companies need not comply with the CTA’s January 1, 2025, BOI reporting deadline pending further order of the Court.”

On Dec. 5, the government appealed this ruling to the U.S. Court of Appeals for the Fifth Circuit. FinCEN issued guidance that “in light of a recent federal court order, reporting companies are not currently required to file beneficial ownership information with FinCEN and are not subject to liability if they fail to do so while the order remains in force. However, reporting companies may continue to voluntarily submit beneficial ownership information reports.” 

On Dec. 18, CAI filed an amicus brief in support of the plaintiffs in Texas Top Cop Shop, Inc. v. Garland, et al., in their case challenging the CTA’s implementation and the importance of maintaining the current nationwide temporary preliminary injunction. On Dec. 26^th, a panel of judges with the 5^th Circuit upheld the preliminary injunction. This injunction was not a final ruling on the CTA's constitutionality.

On Dec. 31st, the Government filed a motion to stay this injunction with the U.S. Supreme Court, which was granted by the Supreme Court of the United States on Jan. 31^st. On Jan. 10th, CAI filed an amicus brief with the U.S. Supreme Court requesting the nationwide injunction remain in place.

A separate nationwide order issued by a different federal judge in Texas (Smith v. U.S. Department of the Treasury) still remains in place. Oral Arguments are scheduled for March 25, 2025. 

CAI’S FEDERAL LAWSUIT STATUS

On October 24, 2024, CAI’s preliminary injunction request was DENIED by the federal judge in this case. While this decision was not the outcome CAI had hoped for, it does not mark the end of CAI’s efforts. CAI appealed the court’s denial of the preliminary injunction request on November 4, 2024, and on November 12, 2024, filed its opening brief of the appeal in the Fourth Circuit urging a pause on reporting requirements for community associations while this lawsuit is adjudicated. Legal briefing will continue in January 2025.

CAI’s other lobbying and advocacy efforts continue on Capitol Hill seeking both a one-year delay of implementation of the CTA’s reporting requirements and an exemption for community associations. The lawsuit itself is continuing to go through the legal process even as the preliminary injunction decision is being appealed.