During Christmas week, the Fifth Circuit United States Court of Appeals issued two rulings relating to a nationwide injunction entered by the U.S. District Court for the Eastern District of Texas against enforcement of the Beneficial Ownership Information Reporting Requirements (the “BOI Reporting Rule”) under the federal Corporate Transparency Act (the “CTA”).
Injunction Lifted; Injunction Reinstated
On December 23, 2024, in the case of Texas Top Cop Shop, Inc. et al vs. Garland et al., a panel of judges of the Fifth Circuit “stayed” (i.e., lifted) the injunction against enforcement of the BOI Reporting Rule and the CTA, stating that “the government has made a strong showing that it is likely to succeed on the merits in defending CTA’s constitutionality”. Following the court’s stay of the injunction, the Financial Crimes Enforcement Network (“FinCEN”), the federal Treasury Department agency tasked with administering the CTA and the BOI Reporting Rule, announced it was extending and updating certain BOI report filing deadlines, pushing the initial report filing deadline for most existing companies to January 13, 2025.
Just three days later, on December 26, 2024, a different panel of judges of the Fifth Circuit issued an order vacating the stay of the injunction. In plain English, this means that the court reinstated the injunction. The next day, December, 27, 2024, FinCEN acknowledged that “reporting companies are not currently required to file beneficial ownership information with FinCEN” (see Alert [December 27, 2024] located at https://www.fincen.gov/boi.
What May Happen Next
The Fifth Circuit has announced an expedited schedule of future court proceedings in the Texas Top Cop Shop, Inc. case:
- Appellants’ (i.e., the federal government’s) brief due on February 7, 2025;
- Appellee’s (i.e., the plaintiffs’) brief due on February 21, 2025;
- Appellants’ (i.e., the federal government’s) reply brief due on February 28, 2025; and
- Oral argument to occur on March 25, 2025.
It is possible that this schedule will change.
Several other cases challenging the constitutionality of the CTA and the BOI Reporting Rule are pending in various federal District Courts and Circuit Courts of Appeal. Nevertheless, no court other than the Fifth Circuit has, to date, issued a nationwide injunction against enforcement of the BOI Reporting Rule or the CTA. As indicated by the flurry of activity at the Fifth Circuit during Christmas week, events in any of these cases can occur suddenly and quickly. In any event, the federal government is expected to continue its efforts to remove the injunction as quickly as possible, perhaps including via an appeal to the United States Supreme Court.
What You Should Do Now
In view of the rapid and conflicting developments relating to the CTA and the BOI Reporting Rule, reporting companies will need to be ready to submit their initial BOI reports if and when the injunction is lifted. Accordingly, we continue to recommend that business entities take action as soon as possible to determine if they are “reporting companies” required to comply with the BOI Reporting Rule, to identify their “beneficial owners” and “company applicants” and gather all information needed for reporting.
BLM&H has previously written an extensive summary of the BOI Reporting Rule, including on topics such as what companies are “reporting companies”, how to identify a reporting company’s “beneficial owners” and “company applicants”, and what information must be included in a BOI Report (“Corporate Transparency Act Beneficial Owner Information Reporting Requirements Take Effect on January 1, 2024 – What Business Entities Need to Know and Do” found at https://blmhlaw.com/corporate-transparency-act-beneficial-owner-information-reporting-requirements-take-effect-on-january-1-2024-what-business-entities-need-to-know-and-do/). If you are unfamiliar with the BOI Reporting Rule, we encourage you to read our summary.
How BLM&H Can Help You.
BLM&H will continue to monitor developments with respect to the CTA and the BOI Reporting Rule and the various cases challenging their enforceability and constitutionality.
BLM&H can help you understand and comply with the BOI Reporting Rule. If you have questions about the BOI Reporting Rule or the temporary injunction against its enforcement, or if you need help preparing for your company’s initial, updated or corrected filings should the injunction be lifted, please contact:
Kevin J. Loechl, kloechl@blmhlaw.com, 404.266.3205
Hunter Holliday, hholliday@blmhlaw.com, 404.266.3206
Quincy H. Jackson, qjackson@blmhlaw.com, 404.266.3212
Colton E. Francoeur, cfrancoeur@blmhlaw.com, 404.266.3217