Corporate Transparency Act: FinCEN Provides Guidance in Response to Federal District Court Preliminarily Enjoining Enforcement of the CTA and its Reporting Rule

• 12.9.2024

By: Matteo de Suduiraut, Ben Goldfein and C. S. Avery Reaves

On December 6, 2024, the Financial Crimes Enforcement Network, a bureau of the U.S. Department of the Treasury (“FinCEN”), posted a statement on its website affirming that entities qualifying as “reporting company” (defined below) under the Corporate Transparency Act (the “CTA”) are not currently required to file Beneficial Ownership Information (“BOI”) reports and that all deadlines to comply with the BOI reporting requirement of the CTA are currently stayed, in each case pursuant to an order issued on December 3, 2024, and subsequently amended on December 5, 2024, in Texas Top Cop Shop, Inc., et al. v. Garland et al., No. 4:24-cv-00478 (E.D. Tex.). FinCEN further acknowledged that reporting company are not subject to liability if they fail to file BOI reports while the order from Texas Top Cop Shop remains in effect. 

Written by Judge Mazzant of the U.S. District Court for the Eastern District of Texas, the order grants (i) a preliminary injunction as to the government’s enforcement of the CTA and the final rule implementing its BOI reporting requirements (the “Reporting Rule”) and (ii) a stay of the January 1, 2025, compliance deadline under the Reporting Rule. The order is applicable nationwide and is based on the court’s finding that the plaintiffs in Texas Top Cop Shop are likely to succeed in their claim that the CTA and the Reporting Rule are unconstitutional. 

In its posting, FinCEN made clear that the government continues to believe the CTA is constitutional, citing favorable rulings in the U.S. District Courts for the Eastern District of Virginia and the District of Oregon and emphasizing that Judge Mazzant’s order is not a final determination on the constitutionality of the CTA. FinCEN further noted the U.S. Department of Justice had already filed a notice of appeal of the order to the U.S. Court of Appeals for the Fifth Circuit. Notwithstanding the injunctive relief provided by the order, FinCEN also reminded Reporting Companies that they could continue to voluntarily submit BOI reports on FinCEN’s website. 

The CTA, enacted as part of the National Defense Authorization Act, requires every entity formed or registered to do business in the U.S. that does not meet at least one specified exemption (each, a “Reporting Company”) to disclose information about itself, its beneficial owners, and, in some cases, its company applicants to FinCEN. The CTA and Reporting Rule require every Reporting Company formed or that registered to do business in the U.S. before 2024 to file its initial BOI report by January 1, 2025. Every Reporting Company formed or registered to do business in the U.S. during 2024 must file its initial BOI report within 90 days of its formation or registration. Starting in 2025, this 90-day filing window will be shortened to 30 days. Once a Reporting Company has made its initial filing, it must report any change in required information it has previously provided to FinCEN regarding itself or its beneficial owners by filing an additional BOI report within 30 days of the change.

In light of the order and FinCEN’s statement, we believe that all Reporting Company can reasonably rely on the injunctive relief provided by Texas Top Cop Shop and are not required to file initial BOI reports or update existing BOI reports during the pendency of such relief. While the matter plays out in the courts, we recommend that Reporting Company continue to gather information that would be required in a BOI report but refrain from making any further filings.