Injunction Against Corporate Transparency Act Lifted by Fifth Circuit

On Monday, December 23, 2024, the U.S. Court of Appeals for the Fifth Circuit, in a case styled Texas Top Cop Shop, Inc. v. Garland, granted the government’s emergency motion for a stay of the U.S. District Court for the Eastern District of Texas’s preliminary injunction against implementation of the Corporate Transparency Act (the “CTA”) and its implementing regulations nationwide.[1]

This ruling reinstates the CTA’s reporting and compliance obligations, effective immediately.

As a result of this ruling, reporting companies created (or in the case of non-U.S. entities, first registered in the United States) before January 1, 2024, are now again required to file Beneficial Ownership Information Reports (“BOIRs”) by January 1, 2025. Reporting companies created (or in the case of non-U.S. entities, first registered in the United States) during 2024 are now similarly again required to file BOIRs within 90 days of their formation.

Accordingly, we recommend that entities qualifying as “reporting companies” under the CTA (i.e., entities that do not qualify for one of the CTA’s 23 exemptions) take immediate steps to ensure compliance through the timely filing of an accurate BOIR by January 1, 2025. Failure to comply with the CTA’s reporting requirements or providing false or fraudulent information in a BOIR can result in substantial civil or criminal penalties. Reporting companies should act promptly to avoid the risk of such consequences.

Notably, the Fifth Circuit was not convinced that lifting the district court’s injunction only a few days before the compliance deadline applicable to entities formed before January 1, 2024 “would place an undue burden” on the plaintiffs, reasoning that the injunction had “only been in place for less than three weeks as compared to the nearly four years that the [plaintiffs] have had to prepare since Congress enacted the CTA,” in addition to the year since the Financial Crimes Enforcement Network (FinCEN) promulgated the reporting deadline.

We are closely monitoring developments in this case and any related government guidance. Updates will be provided as the litigation continues to evolve.

Click here for the CTA Resources Page, which includes latest updates and TC's comprehensive memo on the CTA.