On December 26, 2024, the 5^th Circuit Court of Appeals reinstated a nationwide injunction previously issued by a U.S. District Court in Texas, once again enjoining the enforcement of reporting obligations for millions of companies under the Corporate Transparency Act.

The Corporate Transparency Act (“CTA”), which went into effect on January 1, 2024, requires “reporting companies” in the United States to disclose personal identifying information about their “beneficial owners” to the Financial Crimes Enforcement Network (“FinCEN”). The CTA is estimated to impact 32.5 million companies.

Earlier in December, a U.S. District Court in Texas issued a preliminary injunction which temporarily prevented FinCEN from enforcing the CTA’s reporting requirements. The District Court held that the CTA was likely unconstitutional and that its implementation would irreparably harm reporting companies if they were forced to comply. 

On December 23, a three-judge “motions panel” of the Court of Appeals disagreed, opining that the U.S. Department of Justice made a strong showing that it is likely to succeed on the merits in defending the CTA’s constitutionality.  The motions panel then lifted the District Court’s preliminary injunction.

On December 26, a three-judge “merits panel” of the 5^th Circuit Court of Appeals vacated the portion of the motions panel’s order staying the preliminary injunction.  As a result, FinCEN is once again enjoined from enforcing the CTA’s reporting requirements.

While the preliminary injunction provides temporary relief for reporting companies with respect to the CTA reporting requirements, it is not a final decision and the reporting requirements may be reinstated following further court proceedings. If the injunction remains in effect past January 1, 2025, reporting companies should be prepared to comply at a moment’s notice if the injunction is subsequently overturned. 

To learn more, explore our suite of resources prepared by the firm to address frequently asked questions and offer guidance on complying with the CTA. For additional support we invite you to reach out to a member of our Corporate Transparency Task Force: Morgan Herchenbach, Dan McDowell, Brad Peck, and Kristin Thompson.

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