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On January 23, 2025, the U.S. Supreme Court stayed the nation-wide injunction of the Corporate Transparency Act (the “CTA”) that the U.S. District Court for the Eastern District of Texas originally issued in Texas Top Cop Shop v. Garland on December 3, 2024. This is the third reversal related to the original ruling in a month. To recap, the U.S. Court of Appeals for the 5th Circuit first reversed the original injunction on December 23, 2024 and then reinstated it on December 26, 2024. The Supreme Court has now reversed the injunction again. Those subject to the CTA can justly complain of a case of legal whiplash.
One might rightly conclude that legal entities subject to the CTA must now resume the filing and disclosure of their beneficial ownership information. But not so fast. While the Texas Top Cop Shop order was ping ponging through the federal court system, the U.S. District Court for the Eastern District of Texas issued another nation-wide injunction of the CTA on January 7, 2025 in the matter of Smith v. U.S. Department of Treasury. As of January 24, 2025, the government had not appealed the Smith order and the Financial Crimes Enforcement Network (“FinCEN”) has stated that reporting entities are not currently required to file beneficial ownership information, although they may do so voluntarily.
What comes next is anyone’s guess. The 5th Circuit is scheduled to hear arguments in Texas Top Cop Shop on March 25, 2025, and then issue its ruling on the constitutionality of the CTA. That will likely be followed by a further appeal to the U.S. Supreme Court. Whether a stay of the filing requirements will remain in effect pending the conclusion of those proceedings is unknown. To add to the confusion, there are nascent legislative efforts to overturn the CTA.
For the near term, given the Supreme Court’s recent reversal of the injunction in Texas Top Cop Shop, those who have not yet filed their beneficial ownership information may want to be prepared to file quickly, or even to file voluntarily to avoid getting caught in a time crunch. The legal landscape is shifting quickly and reporting entities would be wise to be prepared for anything.
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1 The information contained herein is intended as a general overview and should not be construed as legal advice. Readers should not act upon it without professional counsel and should seek advice applicable to their specific situation.
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