On January 23, 2025, the Supreme Court of the United States issued an order to lift the injunction on the Corporate Transparency Act (“CTA”) that was reinstated by the 5th Circuit Court of Appeals on December 26, 2024, in McHenry v. Texas Top Cop Shop. Despite this order, businesses are not yet required to comply with the reporting requirements of the CTA, since a separate injunction from a different judge in the US District Court for the Eastern District of Texas in Smith v. United States Department of Treasury remains in place. The Financial Crimes Enforcement Network (“FinCEN”) issued an update on January 24, 2025, confirming that reporting companies are not required to file beneficial ownership information (“BOI”) with FinCEN and are not subject to liability if they decline to do so while the Smith injunction remains in place.
The CTA, which went into effect on January 1, 2024, requires “reporting companies” in the United States to disclose personal identifying information about their “beneficial owners” to FinCEN. The CTA is estimated to impact 32.5 million companies.
On December 3, 2024, a U.S. District Court in Texas issued a preliminary injunction in Texas Top Cop Shop which temporarily prevented FinCEN from enforcing the CTA’s reporting requirements. The District Court held that the CTA was likely unconstitutional and that its implementation would irreparably harm reporting companies if they were forced to comply.
On December 23, 2024, a three-judge “motions panel” of the Court of Appeals disagreed, opining that the U.S. Department of Justice made a strong showing that it is likely to succeed on the merits in defending the CTA’s constitutionality. The motions panel then lifted the District Court’s preliminary injunction.
On December 26, 2024, a three-judge “merits panel” of the 5th Circuit Court of Appeals vacated the portion of the motions panel’s order staying the preliminary injunction.
On January 7, 2025, another judge in a U.S. District Court in Texas issued a universal injunction in Smith, which is still in place and preventing the enforcement of the CTA.
On January 23, 2025, the Supreme Court lifted the injunction for Texas Top Cop Shop that was reinstated on December 26, 2024. As the Smith injunction remains in place, this action by the Supreme Court did not result in the reestablishment of obligations for businesses to file BOI reports.
In addition to the two cases mentioned above, there are also cases in the Fourth, Fifth, Ninth, and Eleventh U.S. Circuit Courts of Appeals regarding the constitutionality of the CTA. Given the possibility of a circuit split, the question of the CTA’s constitutionality may end up before the Supreme Court. Additionally, new legislation to repeal the CTA has been introduced and it is unclear how the new Trump administration will react to the CTA. Considering the dynamic nature of the situation and the ongoing developments, it is clear that the obligations under the CTA could change swiftly. We are monitoring the situation and will continue to provide updates as they become available.
To learn more, explore our suite of resources prepared by the firm to address frequently asked questions and offer guidance on complying with the CTA. For additional support, we invite you to contact a member of our Corporate Transparency Act Task Force.
