December 30, 2024
What happened?
On December 26, 2024, a merits panel of the Fifth Circuit Court of Appeals reinstated a nationwide injunction blocking enforcement of the Corporate Transparency Act (CTA) and its required reporting of beneficial ownership information. This came just three days after a motions panel of the court had lifted the preliminary injunction, allowing for enforcement of the CTA.
The CTA, enacted as another tool FinCEN can use to combat money laundering, requires that US entities that existed before 2024 disclose the identities of their beneficial owners—those individuals who own or control the entity. The original deadline to report beneficial ownership under the CTA was January 1, 2025. On Dec. 3, 2024, Texas Top Cop Shop Inc., a firearm retailer, challenged the constitutionality of the law, and a District Court in Texas entered a preliminary injunction barring the enforcement of the CTA. On December 23, 2024, a motions panel of the Fifth Circuit Court of Appeals granted a stay of the preliminary injunction, and FinCEN announced an extended deadline for reporting of January 13, 2025. The stay was reversed on December 26, 2024, when a merits panel of the Fifth Circuit Court of Appeals reinstated the injunction before issuing an expedited briefing and argument schedule.
These reversals have understandably created confusion among businesses (and compliance professionals in particular), who are weighing whether to proceed with their beneficial ownership reporting voluntarily. An en banc session of the Fifth Circuit Court of Appeals or the Supreme Court could add more twists and turns to the case. If no other changes take place, briefs will be filed in February with oral argument starting on March 25, 2025.
FinCEN announced Friday that businesses could still file voluntarily if they choose: “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.”
What does this mean for me?
The filing deadline is suspended, again. Firms that have not already filed may choose to do so voluntarily or monitor the situation closely and wait for more information. If you choose to do the latter, consider coordinating with legal counsel for assistance to ensure you are kept abreast of any changes.
