As described in our earlier client alert, the United States District Court for the Eastern District of Texas in Texas Top Cop Shop, Inc. v. Garland issued a preliminary injunction preventing the Financial Crimes Enforcement Network (FinCEN) from enforcing the Corporate Transparency Act's reporting requirements nationwide and staying its January 1, 2025 reporting deadline. The government has appealed that injunction.
In a down-to-the-wire effort to restore the CTA's reporting obligations and the January 1 deadline, the government filed an emergency motion with the district court and the United States Court of Appeals for the Fifth Circuit seeking to stay the district court's injunction pending appeal. In the alternative, the government requested that the injunction be limited to the plaintiffs in the Texas Top Cop Shop case.
In the motion filed with the court of appeals, the government requested a ruling no later than December 27 "to ensure that regulated entities can be made aware of their obligations to comply before January 1, 2025."
If either the district court or the court of appeals grants the government's motion to stay or limit the injunction (absent a filing deadline extension by the court or FinCEN), the January 1, 2025 filing deadline may be reinstated.
Addressing the nationwide preliminary injunction, FinCEN has stated that "In light of a recent federal court order, reporting companies are not currently required to file beneficial ownership information (BOI) with FinCEN and are not subject to liability if they fail to do so while the order remains in force [emphasis added]."
Given this statement by FinCEN and government's motion before the court of appeals, if the injunction is stayed, reporting companies should not count on FinCEN extending the January 1, 2025 deadline.
Out of the estimated 32.6 million companies expected to file initial reports by January 1, 2025, only about 8 million companies have filed. If the injunction is stayed, FinCEN's website will be inundated with companies trying to file their reports before the deadline, which may lead to delays and technical difficulties.
Reporting companies should continue to gather information and be prepared to file their reports under the Corporate Transparency Act if the injunction is stayed.
Buchanan will continue to monitor these developments and will provide updates as they unfold.
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