Fifth Circuit Reinstates Corporate Transparency Act’s Reporting Requirements, by Seth Meyer, Esq. and Alisha Talati, Esq., 12-24-2024

UPDATE: On December 26, 2024, the Fifth Circuit reversed its previous decision to stay the CTA’s nationwide preliminary injunction pending appeal. The court stated: “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 enjoying enforcement of the CTA and the Reporting Rule is vacated.” The merits panel now has the appeal, which remains expedited.  

On December 23rd, the Fifth Circuit Court of Appeals issued an order staying the nationwide preliminary injunction previously issued by a Texas district court.

The emergency motion for a temporary stay was granted pending the outcome of the Department of Treasury’s ongoing appeal of the district court’s order that had previously enjoined enforcement or filing requirements under the CTA.

As reported in a prior KD law alert, on December 3, 2024, the U.S. District Court for the Eastern District of Texas issued a nationwide preliminary injunction in the case of Texas Top Cop Shop, Inc. v. Garland blocking the U.S. Department of Treasury from enforcing the CTA’s beneficial ownership information (BOI) reporting requirements or imposing penalties for non-compliance.

That immediately set off a flurry of legal filings in Texas and Louisiana.

Background

On December 5, 2024, the U.S. Department of Justice (DOJ) filed a notice of appeal to the Fifth Circuit and then on Dec. 11 filed a motion with the district court requesting a stay of the preliminary injunction pending a decision from the Fifth Circuit. Separately, on December 13, the DOJ filed a motion in the Fifth Circuit asking that the court stay the district court’s order pending appeal or alternatively narrow the injunction to the named plaintiff and requested a ruling from the Fifth Circuit by no later than December 27, 2024.

On December 16, the plaintiff filed its opposition to the request for a stay of the preliminary injunction at the district court. One day later, the DOJ filed its reply, but ultimately the district court declined to issue a stay and therefore the December 3, 2024 ruling remained in effect.

Both parties were awaiting further direction from the Fifth Circuit, which ultimately granted the DOJ’s motion for a temporary stay pending appeal. The court stated in its decision that “the government has made a strong showing that it is likely to succeed on the merits in defending CTA’s constitutionality.” The court further ordered that “this appeal is expedited to the next available oral argument panel.”

Compliance Deadlines:

After the Fifth Circuit’s Dec. 23rd decision, the Financial Crimes Enforcement Network (FinCEN) granted an extension to the reporting deadline. As per an update on FinCEN’s website the following reporting deadlines were given:

• Reporting companies that were created or registered prior to January 1, 2024 have until January 13, 2025 to file their initial beneficial ownership information  reports with FinCEN. (These companies would otherwise have been required to report by January 1, 2025.)
• Reporting companies created or registered in the United States on or after September 4, 2024 that had a filing deadline between December 3, 2024 and December 23, 2024 have until January 13, 2025 to file their initial beneficial ownership information reports with FinCEN.
• Reporting companies created or registered in the United States on or after December 3, 2024 and on or before December 23, 2024 have an additional 21 days from their original filing deadline to file their initial beneficial ownership information reports with FinCEN.
• Reporting companies that qualify for disaster relief may have extended deadlines that fall beyond January 13, 2025. These companies should abide by whichever deadline falls later.
• Reporting companies that are created or registered in the United States on or after January 1, 2025 have 30 days to file their initial beneficial ownership information reports with FinCEN after receiving actual or public notice that their creation or registration is effective.

Kaufman Dolowich continues to monitor developments on this evolving issue. For a more detailed breakdown on the CTA and New York State specific rules, please read KD’s previous blog on the laws.

Authors: Of Counsel Seth Meyer and Associate Alisha Talati