In yet another twist in the Texas Top Cop Shop litigation challenging the constitutionality of the Corporate Transparency Act ("CTA"), on December 26, 2024, the United States Fifth Circuit Court of Appeals (the "Fifth Circuit") reinstated the nationwide preliminary injunction blocking the government's enforcement of the CTA to preserve the constitutional status quo while the parties litigate the merits of the case. As a result of the Fifth Circuit's latest ruling, compliance with the CTA is now voluntary, and reporting companies (as defined under the CTA) are not subject to liability if they choose not to comply with the CTA's requirements.
The Fifth Circuit has set oral arguments on the merits of the litigation for March 25, 2025. Thus, absent relief from an en banc panel of the Fifth Circuit or from the U.S. Supreme Court, the preliminary injunction is likely to remain in effect until at least that date. If the government ultimately prevails regarding the constitutionality of the CTA or successfully obtains another stay of the injunction, reporting companies may again be required to comply with the CTA. Accordingly, reporting companies should continue to closely follow this ongoing litigation and other legal developments regarding the CTA and be prepared to file their beneficial ownership information reports quickly if required to do so.
