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Client Alert: U.S. Government Appeals National Injunction Against Corporate Transparency Act

Update – U.S. Government Files Appeal and Enforcement Agency Issues Statement

Date: December 9, 2024
Following a Texas federal district court’s issuance of a nationwide injunction temporarily halting enforcement of the Corporate Transparency Act (“CTA”), the U.S. government has filed an appeal with the U.S. Court of Appeals for the Fifth Circuit, challenging the district court’s findings (found here). In response to both the national injunction and the appeal, the Financial Crimes Enforcement Network (“FinCEN”), the agency responsible for enforcing the CTA, issued guidance (found here) clarifying that reporting companies are not currently required to file beneficial ownership information (“BOI”) reports and will not face liability for noncompliance “while the preliminary injunction remains in effect.”
 
Background
 
As discussed in our prior Client Alert (found here), the U.S. District Court for the Eastern District of Texas issued a nationwide injunction on December 3, 2024, in the case Texas Top Cop Shop, Inc. v. Merrick Garland (Civil Action No. 4:24-CV-478). The injunction stayed compliance deadlines for reporting companies and temporarily halted enforcement of the CTA pending further court action.
 
Moving Forward

In the alert, FinCEN stipulated that companies will not face liability for failing to comply with the CTA during the period in which the injunction remains in effect. However, FinCEN emphasized that reporting companies may voluntarily submit BOI reports, and, notably, FinCEN does not address whether reporting companies who choose not to voluntarily file could be subject to retroactive enforcement or penalties if the stay is lifted. The US government’s appeal could result in the overturning of the nationwide injunction, restoring compliance obligations under the CTA. Voluntary filing can help reduce the risk of encountering tight deadlines or missing compliance requirements and minimize exposure to potential civil or criminal penalties if CTA reporting requirements are reinstated.
 
We will continue to track this case closely and provide updates on the appeal and any additional guidance provided. For more context on the CTA and its requirements, please see our prior Client Alert.
The information contained here is not intended to provide legal advice or opinion and should not be acted upon without consulting an attorney. Counsel should not be selected based on advertising materials, and we recommend that you conduct further investigation when seeking legal representation.