Government Appeals Nationwide Injunction of the Corporate Transparency Act

As detailed in our client alert regarding the issuance of a preliminary injunction by the Eastern District Court of Texas against the Corporate Transparency Act (CTA), enforcement of the CTA and its reporting rules on beneficial ownership information (BOI) has been temporarily suspended. On December 5, 2024, the U.S. government filed an appeal to the United States Court of Appeals for the Fifth Circuit against this preliminary injunction.

Many of our clients have reached out to inquire about how these new developments affect their reporting obligations. In our previous alert, we recommended that clients continue taking steps to comply with the CTA reporting rules, in the event that a stay of the injunction is granted. Our guidance remains the same and clients should not entirely abandon their efforts to gather information necessary to comply with the CTA to avoid a last-minute scramble if the Fifth Circuit reverses the decision or otherwise stays the injunction.

Under the CTA, entities that were formed on or after January 1, 2024 have 90 calendar days to file their BOI reports. For those entities that have already complied with this obligation and filed the necessary reports, they can rest easy knowing they are currently in compliance with FinCEN and enjoy a bit of a breather from these new and shifting developments. For 2024 entities that have not yet filed their requisite BOI reports or that are approaching their 90-day deadline, we recommend they take the same steps to work towards complying with the CTA reporting rules.

We note that the CTA further reduces the reporting deadline to 30 calendar days for any entities formed on or after January 1, 2025. Given that a decision on the constitutionality of the CTA may not be resolved before 2025, it would be good practice for clients to continue maintaining BOI for their entities to the extent it would allow them to timely file the required reports if the decision were reversed or the injunction lifted.

Regarding enforcement of the CTA, the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (“FinCEN”) has repeatedly stated that enforcement will be focused on entities that willfully fail to file or omit required information from their reports. Given these reassurances, it is unlikely that FinCEN will levy heavy fines on businesses that may not be in compliance due to these fluctuating circumstances, particularly during this early enforcement period. However, we suggest that businesses continue to monitor new developments on this topic as they arise.

Further information on the CTA and step-by-step videos on how the file a BOI report and apply for a FinCEN ID are available in our CTA Resource Center.