Key Takeaways:
- On January 23, 2025, the U.S. Supreme Court stayed a nationwide preliminary injunction of the Corporate Transparency Act ("CTA") previously issued by the U.S. Federal District Court for the Eastern District of Texas (Texas Top Cop Shop, Inc. v. McHenry—formerly, Texas Top Cop Shop v. Garland) ("Texas Top Cop") and reimposed by the U.S. Fifth Circuit Court of Appeals on December 26, 2024.
- Nevertheless, a separate nationwide preliminary injunction of the CTA issued by a different federal judge in the U.S. Federal District Court for the Eastern District of Texas (Smith v. U.S. Department of the Treasury) ("Smith") was not addressed by the U.S. Supreme Court and has not yet been appealed by the Department of Justice.
- The Financial Crimes Enforcement Network ("FinCEN") has confirmed that filings pursuant to the CTA remain voluntary even after the Supreme Court's ruling in Texas Top Cop Shop, Inc. v. McHenry.
Continuing the pattern of bizarre turns of events related to the CTA, on January 23, 2025, the U.S. Supreme Court stayed a nationwide preliminary injunction of the CTA previously issued by the U.S. Federal District Court for the Eastern District of Texas in the Texas Top Cop case. However, the Supreme Court's ruling did not address the nationwide preliminary injunction issued by a different federal judge in the Eastern District of Texas in Smith and the nationwide preliminary injunction in Smith has not yet been appealed by the Department of Justice ("DOJ") and remains in effect.
This creates the extraordinary prospect that the Trump administration's DOJ may choose not to appeal the Smith decision due to increasing Republican opposition to the CTA leaving the law stuck in a state of suspended animation.
To be clear, contrary to certain media reports and statements from some CTA filing service providers and others, reporting obligations and enforcement under the CTA remain enjoined and reporting companies need not submit beneficial ownership reports to the U.S. Treasury Department's FinCEN.
FinCEN's Response
In response to the Supreme Court's ruling, on January 24, 2025, FinCEN confirmed that "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."
Next Steps
The DOJ still has several weeks to appeal the preliminary nationwide injunction in Smith. Numerous other court challenges to the CTA continue to work their way through various federal district and appellate courts and may ultimately reach the U.S. Supreme Court again. Reporting companies should continue to monitor developments in these cases. In addition, there are efforts in Congress to repeal the CTA.
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