The Corporate Transparency Act

There have been two recent developments regarding the Corporate Transparency Act (CTA).

On January 23, 2025, the U.S. Supreme Court granted the government’s motion to stay the nationwide injunction issued in Texas Top Cop Shop, Inc. et al. v. Garland, No. 4:24-cv-478 (E.D. Tex. Dec. 5, 2024) pending its appeal to the U.S. Court of Appeals for the Fifth Circuit (the “Fifth Circuit”).  As we previously reported, the district court in Texas Top Cop Shop had issued an order enjoining both the enforcement of the CTA and its implementing regulations (the “Reporting Rule”).  While the Supreme Court’s order lifts the injunction blocking enforcement of the CTA, reporting obligations under the CTA remain on hold due to a separate nationwide order issued on January 7, 2025, by a different federal judge in Smith et al v. United States Department of the Treasury et al., 6:24-cv-00336 (E.D. Texas, Jan. 7, 2024).

On January 24, 2025, FinCEN released a statement on its website confirming that reporting companies are not currently required to file beneficial ownership information with FinCEN despite the Supreme Court’s action in Texas Top Cop Shop, and that reporting companies will not be subject to liability if they fail to file beneficial ownership information while the Smith order remains in place. FinCEN will continue to accept beneficial ownership reports on a voluntary basis.

We are far from resolution on the constitutionality of the CTA. Following the Supreme Court’s order, the Texas Top Cop Shop case will return to the Fifth Circuit for oral arguments in March. It remains to be seen whether the government will file an appeal in the Smith case, and there are several other cases pending that address the CTA.  The recent election may also affect litigation related to the CTA and the Reporting Rule.  For now, we recommend that companies closely monitor ongoing CTA litigation and statements made by FinCEN. Companies should identify beneficial owners, gather relevant information, and be prepared to file Beneficial Ownership Information reports within any compliance time periods that may be imposed as a result of further litigation