Fifth Circuit Reinstates Nationwide Injunction on Corporate Transparency Act
In a significant turn of events, the Fifth Circuit Court of Appeals has reinstated a nationwide injunction temporarily halting enforcement of the Corporate Transparency Act (CTA). This ruling, issued on December 26, 2024, marks the third major development in the ongoing legal battle over CTA compliance in the case of Texas Top Cop Shop, Inc. v. Garland.
The CTA, a core component of the Anti-Money Laundering Act of 2020, was designed to combat financial crimes, including money laundering, tax evasion, and terrorist financing, by mandating corporations and LLCs disclose their beneficial ownership information (BOI) to the Financial Crimes Enforcement Network (FinCEN). Though the law aims to enhance transparency, it has faced criticism for its broad applicability and the burden of compliance on small businesses. Additionally, legal challenges have raised constitutional questions, leading to a series of court rulings that have disrupted the planned compliance timeline.
The Latest Decision
A December 3 district court injunction initially paused enforcement of BOI reporting nationwide. On December 23, the Fifth Circuit temporarily stayed that injunction, effectively reinstating the reporting requirements and prompting FinCEN to adjust filing deadlines. However, the court’s December 26 ruling reversed its prior decision, reinstating the injunction and halting enforcement of the Act pending a final determination of its constitutionality.
In its most recent decision, the court emphasized the importance of maintaining the status quo until the merits of the case are fully resolved. It noted that enforcing the BOI reporting requirements at this stage could cause unnecessary disruption and compliance challenges for businesses nationwide.
Implications for Businesses
This latest ruling suspends all BOI reporting deadlines, previously extended by FinCEN to January 13, 2025. Businesses are now temporarily relieved of the reporting requirements but face ongoing uncertainty about the future enforcement of the CTA.
Though the injunction remains in place, the CTA itself has not been declared unconstitutional. Companies are advised to prepare for potential changes and to monitor the appeals, which will include a timeline for oral arguments.
What’s Next?
The court has ordered an expedited appeal process, which will prioritize the resolution of this case and ultimately determine whether the CTA’s reporting requirements are enforceable. In the meantime, businesses should consult with legal and compliance professionals to evaluate their obligations and risk management strategies in light of these developments.
As the situation evolves, businesses should remain aware and proactive. NCBA will keep its members informed of future developments. For additional resources and updates, visit the FinCEN website or consult with qualified legal counsel.
The CTA, a core component of the Anti-Money Laundering Act of 2020, was designed to combat financial crimes, including money laundering, tax evasion, and terrorist financing, by mandating corporations and LLCs disclose their beneficial ownership information (BOI) to the Financial Crimes Enforcement Network (FinCEN). Though the law aims to enhance transparency, it has faced criticism for its broad applicability and the burden of compliance on small businesses. Additionally, legal challenges have raised constitutional questions, leading to a series of court rulings that have disrupted the planned compliance timeline.
The Latest Decision
A December 3 district court injunction initially paused enforcement of BOI reporting nationwide. On December 23, the Fifth Circuit temporarily stayed that injunction, effectively reinstating the reporting requirements and prompting FinCEN to adjust filing deadlines. However, the court’s December 26 ruling reversed its prior decision, reinstating the injunction and halting enforcement of the Act pending a final determination of its constitutionality.
In its most recent decision, the court emphasized the importance of maintaining the status quo until the merits of the case are fully resolved. It noted that enforcing the BOI reporting requirements at this stage could cause unnecessary disruption and compliance challenges for businesses nationwide.
Implications for Businesses
This latest ruling suspends all BOI reporting deadlines, previously extended by FinCEN to January 13, 2025. Businesses are now temporarily relieved of the reporting requirements but face ongoing uncertainty about the future enforcement of the CTA.
Though the injunction remains in place, the CTA itself has not been declared unconstitutional. Companies are advised to prepare for potential changes and to monitor the appeals, which will include a timeline for oral arguments.
What’s Next?
The court has ordered an expedited appeal process, which will prioritize the resolution of this case and ultimately determine whether the CTA’s reporting requirements are enforceable. In the meantime, businesses should consult with legal and compliance professionals to evaluate their obligations and risk management strategies in light of these developments.
As the situation evolves, businesses should remain aware and proactive. NCBA will keep its members informed of future developments. For additional resources and updates, visit the FinCEN website or consult with qualified legal counsel.