On December 3, 2024, a Texas federal district court issued a preliminary injunction blocking enforcement of the Corporate Transparency Act (CTA). The Department of Treasury’s Financial Crimes Enforcement Network (FinCEN) has acknowledged the nationwide preliminary injunction and, on December 5, 2024, the Department of Justice appealed the court’s decision to the Fifth Circuit Court of Appeals.

The court’s injunction comes just days before one of the CTA’s key reporting deadlines. Under the act, unless exempt, every entity formed or registered in the U.S. before January 1, 2024, is required to file beneficial ownership information (BOI) reports with FinCEN on or before December 31, 2024. The CTA also requires non-exempt entities formed in 2024 to file BOI reports within 90 days of formation while those formed on or after January 1, 2025, are required to file within 30 days of formation. 

Key takeaways from the Texas court’s preliminary injunction and the government’s response include:

• BOI reports are not required to be filed with FinCEN for as long as the injunction remains in effect and is not narrowed in scope. FinCEN has acknowledged that the court’s stay extends to all required filings, regardless of the entity’s formation date.
   
• It is not clear how quickly the Fifth Circuit will rule on the government’s appeal and whether it will lift or narrow the scope of the stay.
   
• If the stay is lifted or narrowed, there is currently no indication as to how much time reporting companies will be given to make the required filings.
   
• FinCEN has left the electronic filing portal open and is accepting voluntary CTA filings.

Given all of the uncertainties, we recommend that every company at a minimum complete its analysis of the CTA’s application to the company. If it determines that a BOI filing would be required, it should gather the information and documents needed, so that it is positioned to quickly file if the injunction is overturned, vacated, or narrowed. We expect that many reporting companies will choose to go ahead and voluntarily file BOI reports now, rather than risk being subject to a quick deadline on short notice.

You can find our previous client alerts about the CTA linked below:

• New Reporting Requirements Under the Corporate Transparency Act (November 28, 2022)
   
• The Corporate Transparency Act Is Coming. Are You Ready? (November 15, 2023)
   
• The Corporate Transparency Act: Key Deadline Fast Approaching and Other Recent Updates for Companies (August 29, 2024)

For more information on the CTA, please contact us or your regular Parker Poe contact. You can also subscribe to our latest alerts and insights here.