UPDATE: A decision by the Fifth Circuit Court of Appeals on December 23, 2024 lifted the preliminary injunction. FinCEN responded by extending the January 1, 2025 compliance deadline for existing Reporting Companies until January 13, 2025, and also granted extensions to certain Reporting Companies formed in the fourth quarter of 2024. Then, a December 26, 2024 decision by a separate merits-panel of the Fifth Circuit Court of Appeals lifted the stay of the preliminary injunction originally granted by the motions-panel of the Fifth Circuit on December 23, 2024. This decision halts compliance requirements for Reporting Companies under the Corporate Transparency Act, including the submission of Beneficial Ownership Information Reports (“BOIR”). Please see our latest alert for more information.
On December 3, 2024, a Texas federal court issued a nationwide preliminary injunction against the Corporate Transparency Act (“Act”). This decision halts compliance requirements for Reporting Companies under the Act, including the submission of Beneficial Ownership Information Reports (“BOIR”) for existing Reporting Companies, which were originally due by January 1, 2025, as well as the 90-day filing deadline for newly-formed Reporting Companies.
The decision, issued by Judge Amos L. Mazzant III of the U.S. District Court for the Eastern District of Texas, grants relief to millions of business entities registered in the United States which are classified as Reporting Companies. As a result of the injunction all filing deadlines under the Act have been stayed. The court did not outright declare the Act unconstitutional, but did rule that the plaintiffs in the court were likely to prevail on the merits of their Constitutional Challenge under the 10th Amendment in addition to ruling in the plaintiffs’ favor on other requirements to grant the injunction. As a result, Reporting Companies are not required to comply with the Act’s filing deadline or other obligations while the injunction remains in effect. Additionally, so long as the injunction remains in place, any entity that has already complied with the Act’s reporting requirements does not need to take any further action, including filing updated or corrected reports.
It is important to note that, should the injunction be lifted or reversed on appeal, enforcement of the Act could resume, and compliance requirements would be reinstated.
The attorneys at Barley Snyder continue to follow the Corporate Transparency Act closely and provide timely updates as new information is released. If you have any questions regarding this decision or the Act generally, please contact Dan Desmond, Charmaine Nyman, or any member of Barley Snyder’s Business Practice Group. You may also visit our Corporate Transparency Act Response Team webpage for more information and previous alerts on this matter.
NOTE: The Department of Justice filed a Notice of Appeal to the court’s injunction on December 5, 2024. Further, in an alert posted on the BOIR website, FinCEN stated: “While this litigation is ongoing, FinCEN will comply with the [injunction] for as long as it remains in effect. Therefore, reporting companies are not currently required to file their [BOIR] and will not be subject to liability if they fail to do so while the preliminary injunction remains in effect.”
