Recent Developments in the Courts regarding the Corporate Transparency Act

There continue to be development regarding the Corporate Transparency Act (“CTA” ).

On January 23, 2025, the United States Supreme Court granted the government’s motion to stay the nationwide injunction issued by a federal judge in a Texas case (the “Top Cop Shop case”). In that case, the district court had stayed the enforcement of the beneficial ownership reporting rule, as well as the deadlines for reporting. The Supreme Court stayed the lower court’s injunction while the case is on appeal, which would have meant the CTA could be enforced while the case is on appeal if the only injunction in place had been in that Texas case.

However, a separate nationwide injunction against enforcement of the CTA had been issued on January 7, 2025, by a different federal judge in Texas in the case of Smith v. U.S. Department of the Treasury (the “Smith case”). Similar to the court in Texas Top Cop Shop, this court stayed the effective date of the beneficial ownership reporting rule while the case is pending.

The Supreme Court’s decision on January 23 only applies to the order in the Texas Top Cop Shop case. Thus, while the injunction issued in the Smith case remains in force, reporting companies are not currently required to file beneficial ownership information with the Financial Crimes Enforcement Network (“FinCEN”), pending any action by the Supreme Court or the Fifth Circuit. This means currently that reporting companies are not subject to liability if they fail to file this information while the Smith order remains in effect.

What does all of this mean?

While reporting companies are not currently required to report beneficial ownership information to the FinCEN and reporting deadlines remain suspended, reporting companies may continue to voluntarily submit beneficial ownership information reports to FinCEN while the Smith order remains in force. Considering the fact that the Supreme Court’s decision lifted the injunction issued in Texas Top Cop Shop, there is a strong likelihood that it would do so in the Smith case if the government were to apply for such relief. In the event that this happens, it should be expected that  FinCEN would reinstate the beneficial ownership reporting requirements. Hopefully, FinCEN will provide additional time for reporting companies to meet their obligations, but this remains to be seen.