What Happened

In Texas Top Cop Shop v. Garland et al. (Case 24-40792) (Dec. 23, 2024), the US Court of Appeals for the Fifth Circuit granted the government’s motion for a stay pending appeal, in effect, overturning the nationwide preliminary injunction of the Corporate Transparency Act (CTA) until the case can be argued on the merits at the district court. The decision restores the reporting requirements under the CTA, and eligible companies that have not yet reported their required beneficial ownership information will be required to do so under the modified deadlines outlined below. The CTA, enacted as part of broader anti-money laundering efforts, mandates companies to disclose their beneficial ownership information to a federal database maintained by the US Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN).

What’s Next

While litigation remains ongoing, the decision of the Fifth Circuit signals the court’s view that the “government has made a strong showing that it is likely to succeed on the merits in defending the CTA’s constitutionality,” a near opposite view of the District Court. To this point, four district courts have addressed the CTA’s constitutionality: Two held the CTA is likely constitutional and two view the CTA as unconstitutional, one issuing a nationwide injunction (Texas Top Cop Shop) and the other only issuing an injunction that covered the plaintiffs in the case (Nat’l Small Bus. United v. Yellen). Plaintiffs in the Texas Top Cop Shop now have the option to either (a) argue the merits at the district court level or (b) seek relief from the Supreme Court through filing an application to vacate the stay.

Timelines on further updates are unclear and, for now, we are counseling clients to file by the applicable deadlines below if their entities meet the reporting obligations under the CTA.

FinCEN Accommodations

Since the nationwide injunction has been lifted, FinCEN issued guidance providing certain extensions to its reporting requirements as further outlined below:

• Reporting companies created or registered prior to January 1, 2024, have until January 13, 2025, to file their initial beneficial ownership information reports with FinCEN.
• Reporting companies created or registered in the United States on or after September 4, 2024, that had a filing deadline between December 3, 2024, and December 23, 2024, have until January 13, 2025, to file their initial beneficial ownership information reports with FinCEN.
• Reporting companies created or registered in the United States on or after December 3, 2024, and on or before December 23, 2024, have an additional 21 days from their original filing deadline to file their initial beneficial ownership information reports with FinCEN.
• Reporting companies that qualify for disaster relief may have extended deadlines that fall beyond January 13, 2025. These companies should abide by whichever deadline falls later as further outlined on FinCEN’s website.
• Reporting companies that are created or registered in the United States on or after January 1, 2025, have 30 days to file their initial beneficial ownership information reports with FinCEN after receiving actual or public notice that their creation or registration is effective.

We’re Here to Help

We know that this circuit court decision and updated FinCEN guidance may raise additional questions and has accelerated reporting requirements for many of our clients. We understand that many of our clients’ needs and transaction structures may require deeper analysis and that updates from FinCEN may be forthcoming. Navigating the intricacies of the CTA can be complex and our team is available to provide counsel tailored to your specific needs, especially on a shortened timeline. We can assist you in understanding the implications of the CTA for your entities and transactions, and we can provide guidance in ensuring compliance with the new regulatory framework.

Hunton Andrews Kurth will continue to monitor closely the development and implementation of the CTA in this evolving regulatory landscape. Please contact a member of the firm’s CTA working group if you have any questions or would like further information regarding these developments or other questions related to compliance.

CTA Working Group: CorporateTransparencyAct@HuntonAK.com.