Business and International Tax Blog

On December 26, 2024, the Fifth Circuit Court of Appeals vacated its December 23, 2024 stay of the preliminary injunction against the Corporate Transparency Act (CTA), reinstating the nationwide injunction issued by the Eastern District of Texas. As a result, reporting companies are once again not required to file Beneficial Ownership Information (BOI) reports with the Financial Crimes Enforcement Network (FinCEN) while the injunction remains in effect. FinCEN has issued a statement confirming this development, and reiterating, consistent with its position prior to the Fifth Circuit’s December 23, 2024 ruling, that companies may continue to voluntarily file BOI reports.

The Roller Coaster Since December 3

The legal landscape for the CTA has been turbulent since December 3, 2024, when the Eastern District of Texas first issued a nationwide injunction against the CTA and its Reporting Rule. That injunction was briefly stayed by a Fifth Circuit panel on December 23, reinstating the CTA’s reporting requirements. However, on December 26, 2024, a different Fifth Circuit panel vacated the stay, once again halting enforcement of the CTA.

This back-and-forth has created significant uncertainty for those companies navigating their compliance obligations. Per a scheduling order issued the morning of December 27, 2024 by the Fifth Circuit Court of Appeals, oral arguments are scheduled to occur on March 25, 2025.

What This Means for Your Company

1. No Immediate Filing Obligation: Companies are not currently required to file BOI reports with FinCEN and will not face penalties for non-compliance during this period.
2. Maintain Compliance Readiness: Given the rapidly changing legal landscape, companies should remain prepared to comply with BOI reporting requirements if the injunction is lifted.
3. Voluntary Reporting: Companies that wish to proactively submit BOI reports can still do so, as allowed by FinCEN.
4. Monitor Legal Developments; Continue to Factor CTA into Business Changes: Further changes could occur as the case progresses. Companies considering restructuring, mergers, consolidations, or dissolutions should continue evaluating the CTA’s potential implications. Likewise, changes in ownership or substantial control should not be overlooked, and ongoing compliance efforts should not be abandoned.

Conclusion

The Fifth Circuit’s decision to vacate the stay more or less returns us to the legal landscape prior to the December 23, 2024 ruling. While reporting requirements are currently suspended, the situation remains fluid, and businesses should stay informed about developments.

If you have any questions regarding the enforcement of the Corporate Transparency Act, or if we can be of any assistance, please reach out to our firm and we would be happy to assist.