By: Katherine A. Day, Esq. (kad@efclaw.com) and
Matti C. Tacy, Esq. (mct@efclaw.com)
Corporate Attorneys, Egan, Flanagan and Cohen, P.C.
The legal challenges to the constitutionality of the Corporate Transparency Act (“CTA”) have kept affected reporting companies on their toes in recent weeks. As of December 26, 2024, reporting companies are currently not required to file beneficial ownership information (“BOI”) with the Financial Crimes Enforcement Network (“FinCEN”), following a series of court orders regarding a nationwide preliminary injunction that was on, then off, then on again. FinCEN, however, continues to accept voluntary BOI reports from reporting companies while the nationwide injunction is in effect.
On December 3, 2024, U.S. District Court Judge Amos L. Mazzant III issued an order granting a nationwide preliminary injunction that halted the CTA, 31 U.S.C. § 5336 and enforcement of the Reporting Rule, 31 C.F.R. 1010.380. Judge Mazzant issued the order in the case of Texas Top Cop Shop, Inc. v. Garland, U.S. Dist. Ct., No. 4:24-cv-00478 (E.D. Tex. Dec. 3, 2024), ruling that reporting companies need not comply with the CTA’s January 1, 2025, BOI reporting deadline.
Attorney Katherine (Kate) Day chair’s EFC’s Corporate Department, which also includes Stefan Sjoberg, Esq.; Kylie Brown, Esq., and Matti Tacy, Esq
To many in the business community, this reprieve was a relief. That relief, however, was short lived. Following an appeal and motion to stay the injunction by the U.S. Department of Justice, the motions panel from the U.S. Fifth Circuit Court of Appeals granted the DOJ’s motion and stayed the preliminary injunction on December 23, 2024. This decision reinstated the requirement for BOI reporting. As a result, FinCEN quickly issued an extension until January 13, 2025, for BOI reporting of some reporting companies.
Just three days later, however, on December 26, 2024, the Fifth Circuit’s merits panel vacated the prior December 23rd order, thereby reinstating the district court’s original nationwide preliminary injunction enjoining enforcement of the CTA and the Reporting Rule. In response to the most recent court order, FinCEN confirmed that “reporting companies are not currently required to file beneficial ownership information with FinCEN. Reporting companies may continue to voluntarily submit beneficial ownership reports” while the injunction is in effect. Additional information from FinCEN can be found at https://www.fincen.gov/boi.
What’s Next for Reporting Companies
The Fifth Circuit has issued an expedited schedule for the DOJ’s appeal, with oral arguments to be held on March 25, 2025. Additionally, the DOJ filed a motion with the Supreme Court of the United States on December 31, 2024, seeking to stay the injunction pending the ongoing appeal. Although the injunction is in effect for now, reporting companies should remain prepared to act quickly to file their BOI report in the event the injunction is again lifted and reporting requirements are reinstated.
Egan, Flanagan and Cohen’s corporate legal team continues to follow these ongoing cases and remains ready to assist with any CTA questions. Nothing in this legal update should be construed as legal advice. However, if you have any questions regarding the CTA or reporting obligations, you can contact our team directly by emailing Attorney Kate Day, Esq. at kad@ecflaw.com or Attorney Matti Tacy, Esq. at mct@efclaw.com or by calling (413) 737-0260.
