The Corporate Transparency Act is On Hold Again | By: Chris Manderson
The Fifth Circuit’s injunction against Corporate Transparency Act (CTA) enforcement is back in force. Beneficial Ownership reporting is once again suspended under the District Court’s preliminary injunction issued on December 3, 2024, which remains under appeal by the U.S. government.
On December 23, 2024, a Fifth Circuit motions panel temporarily stayed the District Court’s injunction, reinstating reporting obligations under the CTA pending the appeal’s outcome. In response, FinCEN moved swiftly to reimpose slightly modified reporting deadlines.
On December 26, 2024, the Fifth Circuit Court of Appeals vacated the stay, reinstating the preliminary injunction. CTA enforcement is again suspended under the injunction. The Court explained:
“The merits panel now has the appeal, which remains expedited, and a briefing schedule will issue forthwith. However, in order to preserve the constitutional status quo while the merits panel considers the parties’ weighty substantive arguments, that part of the motions-panel order granting the Government’s motion to stay the district court’s preliminary injunction enjoining enforcement of the CTA and the Reporting Rule is VACATED.”
The two-page order is available here: Fifth Circuit Order
Current Status and Uncertainty
The ultimate outcome of this litigation—and the CTA’s long-term status—remains uncertain. It could ultimately be resolved by the U.S. Supreme Court.
FinCEN Has Not Issued Guidance Since December 26:
- Following the December 23 order, FinCEN quickly issued guidance to reimpose reporting deadlines.
- After the December 3 injunction, however, FinCEN delayed its response and only issued the following statement several days later: “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.”
- This statement has since been removed from FinCEN’s website.
As of now, FinCEN has not issued updated guidance in response to the Fifth Circuit’s December 26 decision. We are closely monitoring these developments and will provide updates as new information becomes available.
Next Steps for Reporting Entities:
Given the potential for rapid developments, entities subject to CTA reporting should:
- Monitor updates closely and stay in contact with legal and compliance advisors.
- Prepare Beneficial Ownership information to ensure readiness for a possible reinstatement of reporting requirements.
If enforcement resumes, do not assume that the January 13, 2025, deadline (now enjoined) will be extended unless explicitly stated in new guidance from FinCEN. Additionally, Beneficial Ownership information could still be required by financial institutions when opening certain bank or financial accounts.
Background on the CTA: enacted in 2021, the CTA required corporate entities (corporations, LLCs, and LPs) to report their beneficial owners to FinCEN. For further details on the CTA and its requirements prior to this injunction, please refer to our December 2023 client alert linked here.
For further guidance on the injunction, see our December 10 client alert: ECJ Client Alert - December 10, 2024.
