Alert

And Now We Wait – DOJ Appeals to Fifth Circuit and FinCEN Makes a Statement on CTA Preliminary Injunction

December 9, 2024

On December 5, 2024, the Department of Justice (DOJ), on behalf of the Department of the Treasury, filed a Notice of Appeal to the Fifth Circuit challenging the nationwide preliminary injunctive relief from compliance with the reporting obligations under the Corporate Transparency Act (CTA). As discussed in our prior alert, on December 3, 2024 (amended on December 5, 2024), the U.S. District Court for the Eastern District of Texas in Texas Top Cop Shop, Inc., et al. v. Merrick Garland, Attorney General of the United States enjoined compliance with the beneficial ownership information (BOI) reporting requirements to the U.S. Department of the Treasury Financial Crimes and Enforcement Network (FinCEN) under the CTA (Reporting Rule). As a result, the compliance deadline is stayed, and FinCEN is prevented from enforcement of compliance violations due to the law being “likely unconstitutional.” 

Pending further order of the court, reporting companies need not comply with the CTA’s January 1, 2025, BOI reporting deadline. Further, because the court enjoined the application and enforcement of the CTA and the Reporting Rule, stating that “neither may be enforced,” any compliance deadlines in the Reporting Rule are currently enjoined, and not just the January 1, 2025, initial BOI reporting deadline.

As expected, and in short order, the DOJ filed a notice of appeal to the Fifth Circuit. FinCEN followed the appeal by issuing a statement stating reporting companies are not currently required to file BOI and are not subject to liability if they fail to do so while the litigation is pending, and the District Court’s order remains in effect. Although reporting companies can breathe a sigh of relief, for the time being, a wait-and-see approach is still recommended.

Reporting companies should be prepared to file and meet the deadline as the outcome of the appeal remains uncertain. While FinCEN stated that it would abide by the preliminary injunction, reporting companies will be required to file by the deadline if the injunction is vacated or overturned. The FinCEN BOI E-Filing System remains active to file BOI reports, and FinCEN stated that reporting companies can still file BOI reports voluntarily while the litigation is pending. We will continue to monitor the status of the case, along with guidance from FinCEN.

Please contact McGlinchey attorneys JP Perrault or Douglas Charnas with questions as we continue to monitor these developments.