In a stunning set of legal developments this past week, the U.S. Court of Appeals for the Fifth Circuit first reinstated the enforcement of the Corporate Transparency Act (the “CTA”) across the United States, then once again restored the nationwide injunction banning the law’s enforcement. The upshot is that, at least for the time being, companies will still not be required to report information about their owners to the Financial Crimes Enforcement Network (“FinCEN”).
Whipsawing Court Rulings over the Holiday Week
We previously wrote about the preliminary injunction preventing enforcement of the CTA here. To review: On December 3, 2024, a Texas court blocked the CTA nationwide, and FinCEN responded by indicating that all required filings under the CTA are now “voluntary.”
We indicated in that article that the government was appealing the injunction and that we would provide updates as necessary. Since then, there has been significant action in this litigation, as, last week, while most Americans were enjoying the holidays, the U.S. Fifth Circuit Court of Appeals whipsawed between conflicting rulings. First, on December 23, 2024, a motions panel of the Fifth Circuit granted the government a stay pending appeal of the preliminary injunction blocking nationwide enforcement of the CTA. That resurrected the CTA throughout the country, and FinCEN responded by immediately reinstating the filing requirement, with a modified deadline of January 13, 2025 for most companies.
However, the government’s victory was short-lived, as, on December 26, 2024, the merits panel of the Fifth Circuit vacated the stay of the preliminary injunction issued only three days prior, bringing back the status quo that existed as of the December 3rd ruling and once again blocking enforcement of the CTA. FinCEN responded on December 27, 2024 by indicating that filings are not required at this time and that filing is once again “voluntary.” FinCEN’s notice responding to the recent ruling can be found at the following link: https://fincen.gov/boi (See the “Alert” titled, “Impact of Ongoing Litigation – Deadline Stay – Voluntary Submission Only).
Therefore, as of now, entities covered by the CTA’s filing requirements (“Reporting Companies”) are not required to file.
Review of Filing Requirements
Given the back-and-forth in the current litigation, Reporting Companies should remain alert and prepare to comply with the CTA in case there are further legal developments that once again change the status quo. Under the CTA, Reporting Companies are required to submit identifying information regarding their Beneficial Owners and certain other individuals by these new deadlines. A “Beneficial Owner,” as defined by the CTA, is any individual who owns or controls 25% or more of the equity interests in a company or has significant responsibility to control, manage, or direct a company. This includes most officers and directors, and other control persons.
If the CTA goes back into effect, each Reporting Company will be required to provide the following information to FinCEN about each of its Beneficial Owners:
- Full legal name
- Date of birth
- Current residential street address
- The ID Number of, and a digital copy of, an unexpired government-issued identifying document that contains a unique identifying number (an unexpired U.S. passport or a state driver’s license; or, if neither exist for a particular Beneficial Owner, an unexpired foreign passport.)
Beneficial Ownership information is required to be reported for all Reporting Companies formed prior to 2024. For business entities formed in 2024 or beyond, in addition to Beneficial Owners, the CTA also requires Reporting Companies to provide similar identifying information on individuals who assist with corporate formation for any entity, referred to as “Company Applicants.”
If any reported information changes, the entity must report the changes within 30 days. Annual reporting is not required, but a new report must be submitted whenever the Beneficial Owners change or their identifying information changes (including instances where their residential addresses or identifying documents expire and are replaced.)
While the information listed above is not currently required to be filed with FinCEN, it is a good idea for Reporting Companies to gather this information and be prepared to file if once again necessary.
Ongoing Legal Developments
It should be noted that the Fifth Circuit’s December 27th ruling merely vacates the prior stay of the Fifth Circuit put into place on December 23rd. The Fifth Circuit has not yet considered the merits of the appeal, but has indicated that briefs are currently due in February 2025, and oral argument has been set for March 25. Therefore, further developments are likely soon. Congress could also change the law, or other courts (including the Supreme Court) could step in. There are also several other federal courts currently hearing cases challenging the CTA and any of those could potentially also invalidate CTA’s reporting requirements if they are reinstated by the Fifth Circuit.
If a court does reinstate the filing requirement, presumably FinCEN would need to provide a new filing deadline. It is also worth noting here that FinCEN will be under new management as of January 20, 2025, when the new Trump administration comes to power, and it is unknown how the incoming Trump administration will approach the CTA litigation or FinCEN’s enforcement of the CTA. There is also the potential for Congress to act to change the law.
The legal landscape surrounding the CTA therefore remains highly dynamic. As these legal proceedings unfold, business owners and control persons are advised to stay informed and prepared for any further changes that may affect their reporting obligations. We will continue to monitor these fast-moving legal developments and provide updates as new information becomes available.
Further Extensions for Florida Companies Affected by Hurricane Milton
In Florida, the situation is further complicated by the recent disaster declarations related to Hurricane Milton. Most counties outside the Florida panhandle were already subject to extended deadlines for CTA compliance, and Florida-based Reporting Companies, depending on when formed and where located, may not be required to file until mid-2025, even if the CTA goes back into effect. Please contact us if you have questions about this.
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Rossway Swan’s Corporate Law Practice Group is dedicated to assisting companies navigate the legal environment. Contact us today to learn more about how we can assist you in protecting and advancing your business interests as changes in the legal landscape occur.
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Prepared by Ethan S. Moore of the Corporate Law Practice Group at Rossway Swan Tierney Barry & Oliver, P.L. Contact Kevin M. Barry or Ethan S. Moore for more information.
