CTA Required Reporting Still on Hold: Recent Supreme Court ruling affects one CTA beneficial ownership case, but other case continues suspension of CTA beneficial ownership reporting deadlines

On January 23, 2025, the Supreme Court of the United States stayed the nationwide injunction issued by a federal judge in Texas  (Texas Top Cop Shop, Inc. v. McHenry—formerly, Texas Top Cop Shop v. Garland) on December 3, 2024, that prevented enforcement of the Corporate Transparency Act (“CTA”). The ruling comes after the government filed an emergency application in the Supreme Court to stay the district court’s order in full. The initial preliminary injunction postponed the effective filing deadlines for compliance as set forth in the CTA’s Reporting Rule. However, although the Supreme Court reinstated the enforcement of the CTA and the Reporting Rule deadline, a separate district court ruling that had stayed the compliance deadline indefinitely remains. For context, the Reporting Rule requires all entities subject to the CTA to file beneficial ownership interest information by a certain deadline (for most covered entities, this deadline was originally January 1, 2025).

Overview of recent litigation impacting filing deadline

As a result of Judge Mazzant’s ruling in the U.S. District Court for the Eastern District of Texas on December 3, 2024 in Texas Top Cop Shop, Inc. v. McHenry, the compliance deadline for companies created or registered to do business in the United States before January 1, 2024 was postponed indefinitely.

On December 5, 2024, the U.S. Department of Justice, on behalf of the U.S. Department of Treasury, appealed this ruling to the U.S. Court of Appeals for the Fifth Circuit. Then, on December 11 and December 13, 2024, the Department of Justice, on behalf of the Financial Crimes Enforcement Network (“FinCEN”), filed emergency motions to stay the district court’s preliminary injunction, in both the district court and Fifth Circuit, respectively. The government’s filings for appeal and emergency motions to stay the injunction did not immediately impact the Reporting Rule deadline for subject entities.

However, on December 23, 2024, the Fifth Circuit granted the government’s emergency motion and stayed the district court’s injunction, pending appeal. This rendered the CTA and its associated Reporting Rule enforceable once again, and FinCEN issued a new compliance reporting deadline of January 13, 2025. But on December 26, 2024, the Fifth Circuit vacated this order making the CTA unenforceable once more as the court reviewed the government’s request for appeal.

Impact of latest Supreme Court action on filing deadline

The January 23rd Supreme Court action stayed the district court’s preliminary injunction, which technically renders the CTA and associated Reporting Rule enforceable once more. However, on January 7, 2025, a different Texas district court judge (Smith v. U.S. Department of Treasury) stayed the Reporting Rule’s effective date.

Therefore, although the Supreme Court reinstated the CTA’s Reporting Rule, this compliance deadline remains indefinitely postponed pending appeal or any additional government action in response to the recent district court ruling in Smith.

In response to the Supreme Court action, FinCEN posted the following update on their website to clarify that reporting remains voluntary at this time:

“In light of a recent federal court order, reporting companies are not currently required to file beneficial ownership information with FinCEN and are not subject to liability if they fail to do so while the order remains in force. However, reporting companies may continue to voluntarily submit beneficial ownership information reports.

***

On January 23, 2025, the Supreme Court granted the government’s motion to stay a nationwide injunction issued by a federal judge in Texas (Texas Top Cop Shop, Inc. v. McHenry—formerly, Texas Top Cop Shop v. Garland). As a separate nationwide order issued by a different federal judge in Texas (Smith v. U.S. Department of the Treasury) still remains in place, reporting companies are not currently required to file beneficial ownership information with FinCEN despite the Supreme Court’s action in Texas Top Cop Shop. Reporting companies also are not subject to liability if they fail to file this information while the Smith order remains in force. However, reporting companies may continue to voluntarily submit beneficial ownership information reports.”

Conclusion & Next Steps

As of the writing of this alert, there is no beneficial ownership filing obligation, although covered entities may choose to file voluntarily. This may change following appellate review or reconsideration of the Smith decision, further decisions in Texas Top Cop Shop, or action/guidance from the U.S. Department of the Treasury.

Authored by Sara Lenet, Gregory Lisa, Karen Scanna, Bradley Kulman, and Nicki Ghazarian-Foye.