FinCEN has posted the following on its website in light of a recent litigation outcome regarding the Corporate Transparency Act (“CTA”) in the Eastern District of Texas. As we have blogged, and as the below notes, other federal district courts have reached opposite conclusions. Also, the Eleventh Circuit still needs to rule on related issues, which creates the possibility of confusion and conflicting results regarding the national application of the CTA.
We don’t purport to have clear predictions here, so we simply quote FinCEN’s posting below. The government recently filed a notice of appeal of the below ruling. Whether the government also might obtain a stay of the district court’s ruling, and, if so, when, remains unclear. For now, the only clear take-away is that the CTA remains in a state of limbo, nation-wide.
On Tuesday, December 3, 2024, in the case of Texas Top Cop Shop, Inc., et al. v. Garland, et al., No. 4:24-cv-00478 (E.D. Tex.), a federal district court in the Eastern District of Texas, Sherman Division, issued an order granting a nationwide preliminary injunction that: (1) enjoins the CTA, including enforcement of that statute and regulations implementing its beneficial ownership information reporting requirements, and, specifically, (2) stays all deadlines to comply with the CTA’s reporting requirements. The Department of Justice, on behalf of the Department of the Treasury, filed a Notice of Appeal on December 5, 2024.
Texas Top Cop Shop is only one of several cases in which plaintiffs have challenged the CTA that are pending before courts around the country. Several district courts have denied requests to enjoin the CTA, ruling in favor of the Department of the Treasury. The government continues to believe—consistent with the conclusions of the U.S. District Courts for the Eastern District of Virginia and the District of Oregon—that the CTA is constitutional.
While this litigation is ongoing, FinCEN will comply with the order issued by the U.S. District Court for the Eastern District of Texas for as long as it remains in effect. Therefore, reporting companies are not currently required to file their beneficial ownership information with FinCEN and will not be subject to liability if they fail to do so while the preliminary injunction remains in effect. Nevertheless, rereporting companies may continue to voluntarily submit beneficial ownership information reports.
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