On January 23, 2025, in McHenry v. Texas Top Cop Shop, Inc (formerly captioned Garland v. Texas Top Cop Shop, Inc.), No. 24A653, 2025 WL 272062 (U.S. Jan. 23, 2025), the United States Supreme Court issued an opinion once again staying the injunction from the United States District Court for the Eastern District of Texas of the Corporate Transparency Act ("CTA"). The injunction had previously halted enforcement of the CTA's reporting requirement that all "reporting companies" disclose information about their beneficial owners to the U.S. Department of the Treasury Financial Crimes Enforcement Network ("FinCEN"). For background information about the CTA and its reporting requirements, please refer to our previous blog post, dated November 5, 2024. For more information about the history of this litigation, please refer to our blog post, dated January 3, 2025.
In granting the federal government's request for a stay of the district court's injunction, the Supreme Court sent the matter back down to the United States Court of Appeals for the Fifth Circuit, where it will rule on the merits of the case. The Fifth Circuit is currently scheduled to hear oral argument on March 25, 2025.
However, despite the Supreme Court's ruling on the injunction in Texas Top Cop Shop, FinCEN, in a statement dated January 24, 2025, announced that the CTA's reporting rule will remain voluntary for now. This is because the CTA and its reporting rule were preliminarily enjoined by a federal court, again in Texas, on January 3, 2025, in Smith v. U.S. Department of the Treasury, No. 6:24-cv-336-JDK, 2025 WL 41924 (E.D. Tex. Jan. 3, 2025). In its statement, FinCEN explicitly stated that reporting companies would not be subject to liability if they fail to file beneficial ownership information while the Smith order remains in force. The U.S. Department of the Treasury has not yet filed a notice of appeal in the Smith case. If it does appeal, the Fifth Circuit will once again have a chance to weigh in.
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