On December 3, 2024, United States District Court Judge Amos Mazzant, a federal district court judge in the Eastern District of Texas, entered a nationwide preliminary injunction, enjoining enforcement of the Corporate Transparency Act (“CTA”), calling its constitutionality into question. Under the injunction, the CTA and the beneficial ownership information (“BOI”) reporting rule cannot be enforced, and reporting companies need not report by the January 1, 2025, deadline pending a further order of the court.
On December 5, 2024, the government appealed Judge Mazzant’s ruling to the Fifth Circuit. Notwithstanding the government’s appeal, the Financial Crimes Enforcement Network (“FinCEN”) announced via a statement posted to its website that it will comply with Judge Mazzant’s ruling for as long as it remains in effect and that reporting companies will not be subject to liability if they fail to report while the preliminary injunction remains in effect. As of the date of this writing, however, FinCEN has not extended the filing deadlines under the CTA should Judge Mazzant’s preliminary injunction be stayed.
The government may seek an emergency stay from the district court or the Fifth Circuit in full or in part during the pendency of the appeal. If the Fifth Circuit were to deny that request, the government could seek emergency relief from the Supreme Court, which could also stay the injunction pending appeal. At this time it is not possible to predict the approach of the government or what action the Fifth Circuit or the Supreme Court may take.
Reporting companies may in their discretion continue to submit BOI reports to FinCEN. Should you opt not to file BOI reports while the injunction remains in effect, we recommend that you continue to assemble information related to the BOI report and monitor the situation closely. Reporting companies should be prepared to file the BOI report quickly if the injunction is lifted and the filing deadline is not extended.
For your convenience, we have linked our previous GRSM client alert that outlines the CTA filing requirements. Should you need assistance with the filing process or have any questions about the CTA, please see the Small Entity Compliance Guide or contact a partner in the GRSM Business Transactions group, including the following GRSM team members: Craig Heryford at cheryford@grsm.com, Ronit Stone at rstone@grsm.com, Carol Schaner at cschaner@grsm.com, Elizabeth Hitt at ehitt@grsm.com, and Dan Graziano at dgraziano@grsm.com.