Key takeaways:
- The Government is appealing the nationwide stay of FinCEN’s BOI reporting rule ordered by the court in Smith v. U.S Department of Treasur
- The Government is seeking a stay of that order as the Smith appeal proceeds
- FinCEN issued guidance indicating it will extend the filing deadline if the stay on the reporting rule is lifted
- Beneficial Ownership Information reporting requirements remain voluntary pending the outcome of litigation.
On December 3, 2024, a federal district court in the case of Texas Top Cop Shop, Inc. v. Garland, No. 4:24-CV-478, entered an order enjoining enforcement of the Corporate Transparency Act (CTA) and its corresponding reporting rule.
The Government appealed, and on December 23, 2024, a motions panel of the U.S. Court of Appeals for the Fifth Circuit granted the Government’s emergency motion for a stay pending appeal.
On December 26, 2024, the Fifth Circuit vacated the stay that had been issued by the motions panel that had lifted the preliminary nationwide injunction. As a result, the CTA BOI reporting requirements went back to being voluntary, pending the appeal, which the court confirmed remains expedited.
On January 7, 2025, in the case of Smith v. U.S. Department of Treasury, No. 6:24-cv-336, a different judge in the U.S. District Court, Eastern District of Texas, issued an order enjoining the Department of Treasury from enforcing the CTA against the plaintiffs and their related entities while their lawsuit is pending and ordered a nationwide stay of the effective date of FinCEN’s reporting rule that implements the CTA, while the lawsuit is pending.
On January 23, 2025, the U.S. Supreme Court lifted the nationwide injunction on the enforcement of the Corporate Transparency Act (CTA) that was issued by the court in Texas Top Cop Shop, Inc. v Garland.
On January 24, 2025, FinCEN issued guidance with respect to the U.S. Supreme Court’s ruling to lift the nationwide injunction. Because the separate nationwide order issued by the federal judge in Smith v. U.S. Department of Treasury remained in place, reporting companies were still not required to file beneficial ownership information with FinCEN. However, FinCEN advised that reporting companies could continue to voluntarily submit beneficial ownership information reports.
On February 5, 2025, the Department of Justice, on behalf of the Department of Treasury, filed a notice of appeal of the district court’s order in Smithv. U.S Department of Treasury, and moved for a stay of the order, pending the Government’s appeal to the 5th Circuit.
On February 7, 2025, FinCEN issued guidance with respect to the appeal of the Smith order, stating that if the district court’s order is stayed, thereby allowing FinCEN’s Reporting Rule to come back into effect, FinCEN intends to extend the reporting deadline for all reporting companies 30 days from the date the stay is granted. Further, in keeping with Treasury’s commitment to reducing regulatory burden on businesses, FinCEN, during that 30-day period, will assess its options to modify further deadlines or reporting requirements for lower-risk entities, including many U.S. small businesses, while prioritizing reporting for those entities that pose the most significant national security risks.
In the meantime, FinCEN will continue to comply with the Smith court’s order for as long as it remains in effect. As a result, FinCEN is not currently enforcing the CTA against the plaintiffs in the Smith action, and FinCEN is also not currently enforcing the requirements of the reporting rule against any individual or entity. Reporting companies are, therefore, not currently required to file beneficial ownership information with FinCEN. Reporting companies may continue to voluntarily submit beneficial ownership information reports.
