Business and International Tax Blog

Although the U.S. Supreme Court recently lifted the nationwide injunction in Texas Top Cop Shop, Inc. v. McHenry, companies are still not required to comply with the reporting requirements under the Corporate Transparency Act (“CTA”). A separate nationwide injunction issued in Smith, et al. v. U.S. Department of the Treasury remains in effect, blocking enforcement of the CTA’s reporting requirements. As clarified on the Financial Crimes Enforcement Network’s (“FinCEN”) website, compliance remains voluntary while the Smith injunction is in place.

Recent Developments

1. Supreme Court Action in Texas Top Cop Shop:

On January 23, 2025, the Supreme Court granted the government’s motion to lift the nationwide injunction issued in the Texas Top Cop Shop case.

2. Separate Injunction in Smith:

Despite the Supreme Court’s decision, an injunction from January 7, 2025 in the Smith case remains in effect.

3. FinCEN’s Clarification:

Following the Supreme Court’s decision, FinCEN reiterated 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 order remains in force.” FinCEN has also confirmed that voluntary compliance remains an option for companies that wish to submit their reports proactively.

4. Potential Shift Under the New Administration:

The Trump Administration may influence FinCEN’s approach to defending the CTA in ongoing litigation. Republican lawmakers have frequently criticized the law, and it remains to be seen whether the new administration will pursue an aggressive defense of the CTA. As of January 26, 2025, the government has not appealed the injunction order in the Smith case.

What This Means for Your Companies

1. No Immediate Filing Obligation: Due to the injunction in the Smith case, companies are not currently required to file beneficial ownership information (“BOI”) reports with FinCEN.

2. Voluntary Reporting: Companies may still submit BOI reports voluntarily, as permitted by FinCEN.

3. Stay Informed: The legal situation remains fluid. If the government appeals the injunction order in the Smith case, the injunction may be lifted by the Fifth Circuit Court of Appeals or the Supreme Court, as we have seen.

4. Prepare for Change: If the Smith injunction is lifted, compliance obligations could resume quickly, with little notice.

Conclusion

While the Supreme Court’s action in Texas Top Cop Shop marked a significant development, the ongoing injunction in Smith means that compliance with the CTA remains voluntary for now. Companies should remain attentive to further legal developments and maintain readiness for potential compliance obligations.

For assistance navigating the CTA’s requirements or preparing compliance strategies, please contact us.