Despite recent developments at the U.S. Supreme Court (discussed below), enforcement of the Corporate Transparency Act ("CTA") remains suspended nationwide - at least for the moment.
A Tale of Two Injunctions. In the latest twist in the CTA's on-and-off-again history, on January 23, 2025, the U.S. Supreme Court lifted the preliminary injunction issued in Texas Top Cop Shop, Inc. The now-lifted preliminary injunction had suspended nationwide enforcement of the Corporate Transparency Act ("CTA"), prompting FinCEN to shift to voluntarily CTA compliance.
While Texas Top Cop Shop, Inc. has garnered the most attention from FinCEN and legal professionals, a second separate and subsequent case – Smith v. U.S. Department of Treasury – also enjoined nationwide enforcement of the CTA. In its very short opinion in Texas Top Cop Shop, Inc., the Supreme Court failed to consider or even mention the Smith case. So, unless and until FinCEN successfully pursues a separate appeal in Smith, the Smith injunction remains in place, providing a second line of defense against CTA enforcement.
How long the Smith injunction continues to survive is a dicey question. In his concurring opinion in lifting the injunction in Texas Cop Shop, Inc., Justice Gorsuch expressly denied the authority of district courts to issue injunctive relief on a nationwide basis.
FinCEN's Response. In a website update posted on January 24, 2025, FinCEN conceded that the Smith preliminary injunction remains in effect and CTA enforcement remains suspended.
Legislative Developments. On January 15, 2025, Senator Tuberville and Representative Davidson introduced Senate and House bills to repeal the CTA, renewing an earlier effort at repeal from last year. Both bills are in their early stages, currently sitting in committee review. In addition to legislative action, President Trump's executive order imposing a regulatory freeze pending review may also affect FinCEN's ability to enforce the CTA.
Now what? Once again, for the fourth time since early December, every entity potentially subject to the CTA must now decide whether to restart their CTA compliance efforts. FinCEN has already knocked down the preliminary injunction in Texas Top Cop Shop, Inc. and appears well positioned to remove Smith's preliminary injunction. So, while it may not yet be time to jump back into full CTA compliance mode, a potential reporting company should at least pay close attention to ongoing CTA developments and may want to continue with some CTA preparatory work, particularly those tasks with long timelines.
