That same day FinCIN issued a new notice providing for a short grace period but requiring that all covered companies file their CTA reports.
Then the tide turned again. On December 26 the Fifth Circuit, merits panel, vacated the motions panel’s stay of the district court injunction with a simple order:
“In order to preserve the constitutional status quo while the merits panel considers the parties’ weighty substantive arguments, that part of the motions-panel order granting the Government’s motion to stay the district court’s preliminary injunction enjoining enforcement of the Corporate Transparency Act and the Reporting Rule is VACATED.”
In order to preserve the constitutional status quo while the merits panel considers the parties’ weighty substantive arguments, that part of the motions-panel order granting the Government’s motion to stay the district court’s preliminary injunction enjoining enforcement of the Corporate Transparency Act and the Reporting Rule is VACATED.
FinCIN the next day issued this notice:
“[A]s of December 26, 2024, the injunction issued by the district court in Texas Top Cop Shop, Inc. v. Garland is in effect and reporting companies are not currently required to file beneficial ownership information with FinCEN.”
Conclusion
Is this the final word on a company’s requirement to report its ownership and management information to FinCIN? Probably not. The Fifth Circuit may next hear the case en banc or it may be appealed to the Supreme Court. In addition to Texas Top Cop, the litigation in the other federal circuits is ongoing. Furthermore, a new Secretary of the Treasury will be sworn in toward the end of January. So, unfortunately, nearly 33 million companies will have to remain alert to continuing developments in the CTA, as well as the ongoing duty to correct and update the information they have already provided to FinCIN.
Further Background
Under the CTA, every business entity organized as a corporation or LLC was required to report to the Department of the Treasury, through the Financial Crimes Enforcement Network (FinCEN) specified ownership and detailed managerial information. According to Treasury’s implementing regulations, this report was due to be filed electronically no later than January 1, 2025. The burden of these reporting requirements was imposed on over 32 million business entities, ranging from nationwide enterprises to tiny homeowners’ associations and from professional practices to neighborhood stores and small business contractors. With few exceptions, the only requirement to become a covered entity under the CTA was to be an active corporation or LLC.
Convinced that this unwarranted intrusion into long-held expectations of privacy was unconstitutional, many companies and their national associations challenged the CTA and Treasury’s implementing regulations. At this point in time, there are pending in at least four federal circuits, challenges to the constitutionality of the CTA and Treasury’s regulations. The most advanced case on the federal dockets is Texas Top Cop Shop, Inc., et al. v. Garland, et al (E.D. Tex.). At the conclusion of litigation, on the request for preliminary relief, the district court issued a preliminary injunction prohibiting Treasury, nationwide, from requiring the CTA reports from all covered entities.
In response to the Texas Top Cop preliminary injunction, Treasury issued a notice indicating that all reporting requirements were suspended and then immediately appealed the preliminary injunction.
