Update as of 12/26/2024:
THE COURT SYSTEM HAS STAYED ENFORCEMENT OF THE CTA AGAIN!
The U.S. Court of Appeals for the Fifth Circuit on Dec. 26, 2024, vacated the recent Court decision imposing enforcement of the CTA again. INSTEAD, the Court reinstated the nationwide preliminary injunction enjoining enforcement of the Corporate Transparency Act (CTA) and its Reporting Rule, as well as any upcoming reporting deadlines. NO FILINGS ARE CURRENTLY DUE.
The Fifth Circuit’s December 26 decision aims to maintain the “constitutional status quo” while a merits panel evaluates the substantive legal arguments surrounding the CTA’s validity. The appeal remains on an expedited schedule.
Below is some of the Court’s rationale for reimposing the NATIONWIDE stay on enforcement of the CTA and related deadlines.
- The CTA implicates constitutional issues that cannot be resolved quickly. As such, requiring people to file BOIs at this point with the uncertainty surrounding whether the CTA is constitutional is not prudent. So, a stay is warranted;
- The seesaw aspects of these constitutional arguments have resulted in confusion about whether the deadlines are enforceable or not. So, a reprieve from compliance to the old or even extended deadlines right now is prudent. So, a stay is warranted;
- There is other current litigation and future litigation on these issues as well (e.g. National Small Business United v. Yellen and perhaps other cases). An appeal to the U.S. Supreme Court is likely. So, a stay is warranted;
- With the briefing schedule set for next year, after the Trump Administration comes into power. It is unclear what position the Trump administration will take or what Congress may choose to do. So, a stay is warranted;
- While the nationwide preliminary injunction remains in place, companies have no obligation to comply with the BOI reporting obligation of the CTA. Essentially, this puts the December 3 decision to stay enforcement nation-wide back into place;
- The injunction applies to initial reports, updates, corrections of companies and other CTA-related filings, regardless of when a company was formed. Every company and those responsible for filing reports may continue to do so VOLUNTARILY.
Once Again, there are no guarantees in life or law. So, companies should remain prepared for potential future compliance obligations. Companies still have the option to file with FinCEN. But if companies do not want to file at this time, it would be prudent to:
- Continue monitoring ongoing litigation and updates from the courts and FinCEN;
- Maintain accurate and up-to-date beneficial ownership records in anticipation of future reporting requirements; and
- Consult legal counsel to address any concerns or questions regarding compliance.
We will continue to keep you informed.
Dugan Kelley, shareholder and attorney
DECEMBER 23rd, 2024: You are likely already aware that a Texas Federal District Court judge enjoined the Corporate Transparency Act and suspended the upcoming deadline to comply with the CTA and associated penalties for noncompliance. WELL, that isn’t the end of the story.
On December 23, 2024, the U.S. Court of Appeals for the Fifth Circuit stayed a nationwide injunction blocking all enforcement of the Corporate Transparency Act (CTA). The Fifth Circuit’s decision effectively reinstates all CTA filing deadlines, including the January 1, 2025 filing deadline for reporting companies that were formed before 2024. However, the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) announced several short extensions, including delaying the filing deadline for pre-2024 reporting companies for 12 days, to January 13, 2025. Accordingly, reporting companies that have not yet filed their initial beneficial ownership information reports (BOIRs) are well advised to immediately resume all CTA filing efforts and submit their BOIRs prior to the new deadlines.
What does this mean for you that have reporting obligations? THE CTA is now reinstated again and not stayed!
NEW DEADLINES:
FinCEN – recognizing that reporting companies may need additional time to file their BOIRs given the timing of recent litigation – has extended the original filing deadline (for reporting companies formed before January 1, 2024) from January 1, 2025 to January 13, 2025.
FinCEN also has extended the filing deadline for reporting companies that were created or registered in the United States on or after September 4, 2024 (and that would have otherwise been required to file between December 3, 2024 and December 23, 2024) to January 13, 2025.
Finally, FinCEN has extended the filing deadline for reporting companies that were created or registered in the United States on or after December 3, 2024 and before December 23, 2024 by an additional 21 days from their original filing deadline.
There likely will be more appeals and more courts who weigh in on the CTA and whether it will continue to be in effect or not. So, as you know, there are no guarantees in life or law.
We will continue to keep you informed.
Dugan Kelley, shareholder and attorney
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