By Susan M. Graham, Certified Elder Law Attorney, Senior Edge Legal, Boise, Idaho
URGENT NOTICE: CORPORATE TRANSPARENCY ACT ENFORCEMENT SUSPENDED
(Please refer to the Blog posted September 23, 2024 for information about the Corporate Transparency Act)
BREAKING DEVELOPMENT: A nationwide injunction has been issued, effectively HALTING all enforcement of the Corporate Transparency Act (CTA) reporting requirements as of December 7, 2024.
CRITICAL IMPLICATIONS:
– All CTA reporting enforcement activities have been SUSPENDED immediately
– This affects reporting obligations for millions of businesses nationwide
– The situation remains fluid and may change with minimal notice
IMMEDIATE RECOMMENDED ACTIONS:
- Put any pending CTA compliance filings ON HOLD
- Document your company’s current compliance status
- Maintain records of any previously completed filings
- Stay alert for further legal developments
THIS IS A DEVELOPING SITUATION. Companies should consult with their business legal counselor regarding specific circumstances and maintain readiness to comply if the injunction is lifted.
For the latest updates, visit FinCEN’s official website.
MORE INFORMATION – SEE ARTICLE BELOW
Corporate Transparency Act (CTA) Enforcement On Hold After Court Ruling[1]
by: Andrew Rosell, Page Patrick of Winstead – Ascend – with Winstead
Wednesday, December 11, 2024
On December 3, 2024, the U.S. District Court for the Eastern District of Texas entered a preliminary injunction suspending enforcement of the Corporate Transparency Act (CTA) and its implementation of regulations nationwide.[1] Shortly following the ruling, the Department of Justice filed a notice of appeal to the U.S. Court of Appeals for the Fifth Circuit.[2]
The CTA, effective on January 1, 2024, requires specific business entities (reporting companies) to file beneficial ownership information reports with the U.S. Financial Crimes Enforcement Network (FinCEN). Under the CTA, reporting companies existing prior to January 1, 2024, are required to submit initial beneficial ownership information reports to FinCEN by January 1, 2025, and those formed or registered after January 1, 2024, must file within 90 days of formation or registration (and 30 days after formation in 2025 and beyond).
However, the enforcement of the CTA has been temporarily suspended as a result of the Eastern District of Texas ruling that ordered a nationwide preliminary injunction. In the ruling, the U.S. District Court for the Eastern District of Texas issued the preliminary injunction enjoining FinCEN from enforcing both the CTA and the corresponding final rule which implements the CTA (the “Reporting Rule”). Unlike previous challenges to the CTA where the scope of the ruling was limited,[3] Judge Mazzant issued a nationwide preliminary injunction of the CTA and the Reporting Rule.[4] As a result, “reporting companies need not comply with the CTA’s January 1, 2025, [beneficial ownership information] reporting deadline pending further order of the Court.”[5]
As anticipated, the U.S. Department of Justice issued a notice of appeal to the U.S. Court of Appeals for the Fifth Circuit on December 5.[6] In addition, FinCEN posted a statement to its website on December 7 confirming that it will comply with the federal court order as long as it remains in effect.[7] FinCEN’s statement notes that while reporting companies are not required to file their beneficial ownership information reports with FinCEN while the preliminary injunction is in effect, reporting companies may voluntarily do so.
As it stands, the CTA cannot be enforced against entities otherwise subject to reporting requirements. But, if the Fifth Circuit or Supreme Court stays the federal district court’s order pending appeal, reporting obligations may change on short notice. Therefore, it is important that clients with filing obligations monitor developments as the appeals process unfolds.
[1] Texas Top Cop Shop, Inc. et al. v. Garland et al., No. 4:24-CV-478, Dkt. 30 (E.D. Tex. Dec. 3, 2024).
[2] Texas Top Cop Shop, Inc. et al. v. Garland et al., No. 4:24-CV-478, Dkts. 32, 34.
[3] See Nat’l Small Business United v. Yellen, 721 F. Supp. 3d 1260 (N.D. Ala. 2024)
[4] Texas Top Cop Shop at 77-78.
[5] ID. at 79.
[6] Texas Top Cop Shop, Inc. et al. v. Garland et al., No. 4:24-CV-478, Dkts. 32, 34.
[7] https://fincen.gov/boi
© 2024 Winstead PC.
[1] December 21, 2024, Volume XIV, Number 356, The National Law Review
