Late last year, we reported that the Corporate Transparency Act (“CTA”) and its beneficial ownership information (“BOI”) reporting requirements (which are summarized in our prior Alert) were on hold, thanks to a nationwide injunction issued by the U.S. District Court for the Eastern District of Texas in Texas Top Cop Shop, Inc. v. Garland. The U.S. Court of Appeals for the Fifth Circuit initially stayed the injunction, then lifted the stay, putting the CTA on ice until it could hear the federal government’s appeal of the district court’s decision. Oral arguments for that appeal are scheduled for March 25, 2025.
Yesterday, the U.S. Supreme Court got into the case, issuing its own stay of the Texas Top Cop Shop injunction. As is often the case with emergent decisions, the Court did not provide a rationale for its decision, although Justice Neil Gorsuch wrote in a short concurring opinion that he wanted to “take this case now” to rule on the legality of “universal injunctive relief.” Only Justice Ketanji Brown Jackson recorded a dissent, saying she would have left the injunction in place while the Fifth Circuit considers the case on an expedited basis, taking into account that it’s been four years since the CTA was enacted, and so a few months of additional delay were unlikely to be harmful.
So, is the CTA back in effect? And are businesses that have not yet filed their reports in violation of the law, seeing as the last deadline extension ran out on January 13? No! It turns out that while the Texas Top Cop Shop injunction was in effect, a different judge from the same district court in a different case issued a separate stay of the effective date for BOI reporting under the CTA. That judge, in Smith v. U.S. Department of the Treasury, similarly held the CTA to be unconstitutional earlier this month. Today, the Financial Crimes Enforcement Network (“FinCEN”) confirmed on its website that BOI reporting remains voluntary and not compulsory in light of the Smith decision.
It is possible that the Smith decision may get stayed or overturned by the Fifth Circuit or the Supreme Court in the days ahead, putting the CTA back into effect. It is also possible, however, that the Trump Administration may abandon the Biden Administration’s efforts to uphold the constitutionality of the CTA. Or Congress may repeal the CTA, seeing as several Republican senators and congressmen have introduced legislation to do just this. What will happen? Stay tuned.
For more information about the CTA, please feel free to contact Jason D. Navarino, Hannah J. Greendyk, or any member of the Riker Danzig Corporate Group.
