On December 26, 2024, the Fifth Circuit merits panel assigned to Texas Top Cop Shop, Inc. v. Garland, No. 24-40792, reinstated a nationwide preliminary injunction enjoining enforcement of the Corporation Transparency Act and its implementing regulations (CTA), by vacating a stay of the injunction that a Fifth Circuit motions panel had entered on December 23, 2024.
That December 23 stay stopped the nationwide preliminary injunction that a district court issued on December 3, 2024, halting the CTA. We wrote earlier about both the preliminary injunction, “After Nationwide Injunction of Corporate Transparency Act, FinCEN Suspends Reporting Requirements as Four Circuits Grapple With Act’s Constitutionality,” and stay, as well as the decision by the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN) to extend the reporting deadline for certain entities from January 1, 2025, to January 13, 2025, in response to the stay, “Fifth Circuit Panel Stays Nationwide Injunction of Corporate Transparency Act, and FinCEN Extends Deadline to January 13.”
The merits panel explained that it vacated the stay “in order to preserve the constitutional status quo while the merits panel considers the parties’ weighty substantive arguments.” On December 27, the court issued an expedited briefing and argument schedule. The government’s opening brief is due February 7, the challengers’ brief due is February 21, the government’s reply brief due is February 28, and the court will hold oral argument on March 25.
The situation remains very uncertain. At least for now, the merits panel’s vacatur of the stay means companies do not need to comply with the CTA’s reporting requirements, although the en banc Fifth Circuit or the Supreme Court could change the situation once again within a matter of days and cause a scramble for reporting companies.
On December 27, 2024, FinCEN noted the vacatur of the stay of the district court’s preliminary injunction and reissued the guidance it had published in response to the original injunction, stating that “reporting companies are not currently required to file beneficial ownership information with FinCEN and are not subject to liability if they fail to do so while the [injunction] remains in force. However, reporting companies may continue to voluntarily submit beneficial ownership reports.”
Given the possibility of future orders from the Fifth Circuit or the Supreme Court that could change the status quo once again, we encourage reporting companies to check FinCEN’s website regularly for its response to court orders.
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For further information, please contact:
Shay Dvoretzky, Partner, Skadden
shay.dvoretzky@skadden.com
