On the afternoon of December 23, the U.S. Circuit Court for the Fifth Circuit (the Fifth Circuit) stayed the preliminary injunction of the U.S. District Court for the Eastern District of Texas (the District Court) relating to the enforcement of the Corporate Transparency Act (the CTA).
As we previously wrote on December 3, 2024, the District Court enjoined the enforcement of the CTA and its reporting deadline of January 1, 2025. On December 5, 2024, the Financial Crimes Enforcement Network (FinCEN) and the U.S. Department of Justice (together with FinCEN, the Government) appealed the District Court’s injunction and filed an Emergency Motion for a Stay Pending Appeal (the Emergency Motion) with the Fifth Circuit.
Today, the Fifth Circuit granted the Emergency Motion. In an unpublished order, the Fifth Circuit held that the Government “has made a strong showing that it is likely to succeed on the merits in defending [the Corporate Transparency Act’s] constitutionality,” disagreeing with substantial portions of the District Court’s constitutional analysis. The Fifth Circuit further held that equitable considerations weighed in favor of allowing the Corporate Transparency Act to be enforced. The Fifth Circuit wrote, in part, that “a last-minute nationwide preliminary injunction would undermine” certain national security interests related to international financial crime and criminal organizations and that the burden on reporting companies was “minimal … estimate[ing] that a typical, simple company would spend about ninety minutes (or about $85 worth of time) to complete and file” a beneficial ownership report. In a footnote, the Fifth Circuit further dismissed the plaintiff’s argument that lifting the District Court’s injunction days before the compliance deadline would place an undue burden on them.
At this time, the Government can enforce the Corporate Transparency Act and its January 1, 2025, reporting deadline for companies formed before 2024. Reporting Companies can file their Beneficial Ownership Information Reports here.
This is a quickly evolving situation. After the District Court issued the injunction, FinCEN posted guidance on its website indicating that while the injunction is in place, Corporate Transparency Act submissions were voluntary. Now that the District Court’s injunction has been paused, that guidance is no longer applicable, but as of the time of writing, the guidance remains on FinCEN’s website. We do not know if FinCEN will issue additional informal guidance regarding filing obligations between now and the end of the year, including whether they will grant any extensions.
UPDATE: On the evening of December 23, 2024, FinCEN published that it is granting extensions to certain reporting companies as follows:
- Reporting companies that were created or registered prior to January 1, 2024 have until January 13, 2025 to file their initial beneficial ownership information reports with FinCEN. (These companies would otherwise have been required to report by January 1, 2025.)
- Reporting companies created or registered in the United States on or after September 4, 2024 that had a filing deadline between December 3, 2024 and December 23, 2024 have until January 13, 2025 to file their initial beneficial ownership information reports with FinCEN.
- Reporting companies created or registered in the United States on or after December 3, 2024 and on or before December 23, 2024 have an additional 21 days from their original filing deadline to file their initial beneficial ownership information reports with FinCEN.
- Reporting companies that qualify for disaster relief may have extended deadlines that fall beyond January 13, 2025. These companies should abide by whichever deadline falls later.
- Reporting companies that are created or registered in the United States on or after January 1, 2025 have 30 days to file their initial beneficial ownership information reports with FinCEN after receiving actual or public notice that their creation or registration is effective.
We continue to monitor all aspects of this development.
