On January 23, 2025, the Supreme Court of the United States granted the federal government’s motion to stay the nationwide injunction preventing enforcement of the Corporate Transparency Act (the “CTA”) entered by the United States District Court for the Eastern District of Texas on December 3, 2024 in Texas Top Cop Shop, Inc. et al. v. McHenry et al., Case No. 4:24-cv-478 (E.D. Tex.) (formerly, Texas Top Cop Shop, Inc. et al. v. Garland et al.). However, despite the Supreme Court’s ruling, enforcement of the CTA remains on hold following a separate nationwide injunction that was entered on January 7, 2025, by a different federal judge in the United States District Court for the Eastern District of Texas in Smith et al. v. United States Department of Treasury et al., Case No. 6:24-cv-00336 (E.D. Tex.).
Following the Supreme Court’s decision, the Financial Crimes Enforcement Network (“FinCEN”), the agency in charge of administration and enforcement of the CTA, published a statement clarifying that reporting companies are not required to file beneficial ownership information with FinCEN at this time despite the Supreme Court’s ruling. The statement went on to provide that reporting companies are not subject to liability if they fail to file their beneficial ownership information while the order in Smith v. United States Department of Treasury remains in place. Therefore, for the time being, reporting companies are not subject to enforcement of the CTA and the trajectory of the CTA remains uncertain while the various legal challenges continue through the judicial process.
The oral argument for the appeal of Texas Top Cop Shop, Inc. v. McHenry is currently set for March 25, 2025, however, it is unknown when the Fifth Circuit Court of Appeals will enter its order following oral arguments. For more information about the history and status of Texas Top Cop Shop, Inc. v. McHenry, please see our December 5, 2024 Alert, December 26, 2024 Alert, and December 30, 2024 Alert.
Reporting companies may still voluntarily submit their beneficial ownership information to FinCEN while Smith v. United States Department of Treasury remains in place. Entities that elect not to file their beneficial ownership information should continue collecting any information that is necessary for their initial reports under the CTA in order to be prepared to file if the reporting requirements are reinstated.
We will continue to monitor the progress of the ongoing challenges to the CTA.
