Overview
WHAT HAPPENED?
On January 23, 2025, the Supreme Court of the United States issued a stay of the nationwide preliminary injunction against enforcement of the Corporate Transparency Act (CTA) (31 U.S.C. § 5336) and the Beneficial Ownership Information Reporting Requirements final rule promulgated thereunder (31 C.F.R. 1010.380), which had been originally entered by the US District Court for the Eastern District of Texas on December 3, 2024, in Texas Top Cop Shop, Inc. v. McHenry, No. 4:24-cv-00478 (E.D. Tex.) (formerly, Texas Top Cop Shop, Inc. v. Garland). As a result, the nationwide preliminary injunction against enforcement of the CTA and the final rule imposed in Texas Top Cop Shop was lifted pending disposition of the appeal in that case before the US Court of Appeals for the Fifth Circuit (and disposition of any petition for writ of certiorari in the Supreme Court).
However, on January 7, 2025, a separate nationwide injunction against enforcement of the final rule was issued by another District Court for the Eastern District of Texas in Smith v. US Department of the Treasury, No. 6:24-cv-336-JDK (E.D. Tex.). As of the time of writing this On the Subject, the order in Smith had not been appealed.
On January 24, 2025, following the Supreme Court’s ruling in Texas Top Cop Shop, the Financial Crimes Enforcement Network (FinCEN) issued an alert that, in light of the order in Smith, reporting companies are still not 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, FinCEN explained that reporting companies may continue to voluntarily submit beneficial ownership information reports (BOIRs).
WHAT NOW?
Following FinCEN’s alert, we recommend that reporting companies continue to be prepared to comply with the CTA and submit BOIRs to FinCEN in the event the order in Smith ceases to apply as a result of a stay of the injunction pending appeal (which happened to the order in Texas Top Cop Shop). Even if the order in Smith ceases to apply, we expect FinCEN to grant a limited extension of any CTA reporting deadlines, as was done when the injunction in Texas Top Cop Shop was initially stayed by the Fifth Circuit on December 23, 2024.
McDermott will continue to monitor for relevant developments. If you have any questions or need advice on the CTA or its application to your business, please contact your primary McDermott lawyer or one of the authors of this article.
