Author: Eriks Dumpis

After a week and a half of yo-yoing federal court decisions affecting the implementation of the Corporate Transparency Act’s requirement for businesses and other entities to file Beneficial Owner Information Reports, the government has now petitioned the United States Supreme Court to weigh in. The Application for a Stay of the Injunction comes on the heels of a pair of conflicting decisions from two different panels of the Fifth Circuit Court of Appeals; the first which had (temporarily) revived the reporting requirement, and the second that upheld the lower court’s injunction against the implementation of the reporting requirement.

For now, the reporting requirement is once again “voluntary” per FinCEN’s guidance, but business owners and others are advised to pay close attention, as a decision by the Supreme Court could come swiftly. And if the injunction is lifted, any extension of the filing deadline is expected to be relatively short in light of the government’s arguments in the Application for a Stay and given the fact that FinCEN’s prior extension provided less than two additional weeks, moving the deadline from January 1, 2025, to January 13, 2025.

The lawyers at Fraser Trebilcock will continue to keep a close eye on these and other developments.

This alert serves as a general summary and does not constitute legal guidance. Please contact us with any specific questions.

Robert D. Burgee is an attorney at Fraser Trebilcock with over a decade of experience counseling clients with a focus on corporate structures and compliance, licensing, contracts, regulatory compliance, mergers and acquisitions, and a host of other matters related to the operation of small and medium-sized businesses and non-profits. You can reach him at 517.377.0848 or at bburgee@fraserlawfirm.com.

FinCEN has recently released an update following the Tuesday, December 3, 2024, ruling from a federal judge in Texas issuing an order granting a nationwide preliminary injunction against the federal government’s enforcement of the Corporate Transparency Act (“CTA”).

Below is the alert from FinCEN.

In light of a recent federal court order, reporting companies are not currently required to file beneficial ownership information with FinCEN and are not subject to liability if they fail to do so while the order remains in force. However, reporting companies may continue to voluntarily submit beneficial ownership information reports.

———

The Corporate Transparency Act plays a vital role in protecting the U.S. and international financial systems, as well as people across the country, from illicit finance threats like terrorist financing, drug trafficking, and money laundering.  The CTA levels the playing field for tens of millions of law-abiding small businesses across the United States and makes it harder for bad actors to exploit loopholes in order to gain an unfair advantage.

On Tuesday, December 3, 2024, in the case of Texas Top Cop Shop, Inc., et al. v. Garland, et al., No. 4:24-cv-00478 (E.D. Tex.), a federal district court in the Eastern District of Texas, Sherman Division, issued an order granting a nationwide preliminary injunction that: (1) enjoins the CTA, including enforcement of that statute and regulations implementing its beneficial ownership information reporting requirements, and, specifically, (2) stays all deadlines to comply with the CTA’s reporting requirements. The Department of Justice, on behalf of the Department of the Treasury, filed a Notice of Appeal on December 5, 2024.

Texas Top Cop Shop is only one of several cases in which plaintiffs have challenged the CTA that are pending before courts around the country. Several district courts have denied requests to enjoin the CTA, ruling in favor of the Department of the Treasury. The government continues to believe—consistent with the conclusions of the U.S. District Courts for the Eastern District of Virginia and the District of Oregon—that the CTA is constitutional.

While this litigation is ongoing, FinCEN will comply with the order issued by the U.S. District Court for the Eastern District of Texas for as long as it remains in effect. Therefore, reporting companies are not currently required to file their beneficial ownership information with FinCEN and will not be subject to liability if they fail to do so while the preliminary injunction remains in effect. Nevertheless, reporting companies may continue to voluntarily submit beneficial ownership information reports.

This alert serves as a general summary and does not constitute legal guidance. Please contact us with any specific questions.

Robert D. Burgee is an attorney at Fraser Trebilcock with over a decade of experience counseling clients with a focus on corporate structures and compliance, licensing, contracts, regulatory compliance, mergers and acquisitions, and a host of other matters related to the operation of small and medium-sized businesses and non-profits. You can reach him at 517.377.0848 or at bburgee@fraserlawfirm.com.