On December 26, 2024, the Fifth Circuit merits panel assigned to Texas Top Cop Shop, Inc. v. Garland, No. 24-40792, reinstated a nationwide preliminary injunction enjoining enforcement of the Corporation Transparency Act and its implementing regulations (CTA), by vacating a stay of the injunction that a Fifth Circuit motions panel had entered on December 23, 2024.
That December 23 stay stopped the nationwide preliminary injunction that a district court issued on December 3, 2024, halting the CTA. We wrote earlier about both the preliminary injunction, “After Nationwide Injunction of Corporate Transparency Act, FinCEN Suspends Reporting Requirements as Four Circuits Grapple With Act’s Constitutionality,” and stay, as well as the decision by the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN) to extend the reporting deadline for certain entities from January 1, 2025, to January 13, 2025, in response to the stay, “Fifth Circuit Panel Stays Nationwide Injunction of Corporate Transparency Act, and FinCEN Extends Deadline to January 13.”
The merits panel explained that it vacated the stay “in order to preserve the constitutional status quo while the merits panel considers the parties’ weighty substantive arguments.” On December 27, the court issued an expedited briefing and argument schedule. The government’s opening brief is due February 7, the challengers’ brief due is February 21, the government’s reply brief due is February 28, and the court will hold oral argument on March 25.
The situation remains very uncertain. At least for now, the merits panel’s vacatur of the stay means companies do not need to comply with the CTA’s reporting requirements, although the en banc Fifth Circuit or the Supreme Court could change the situation once again within a matter of days and cause a scramble for reporting companies.
The vacatur of the stay preempts action by the en banc Fifth Circuit on the challengers’ rehearing petition asking the full Fifth Circuit to vacate the December 23 stay. The court had asked the government to respond to that petition by December 31, 2024, and the government had not yet done so. Now, the government may wish to seek further review to stay the preliminary injunction. One option is for the government to go to the en banc Fifth Circuit, but the 9–8 divide among active judges in high profile cases (as we noted earlier) may make that option unappealing or unavailing. Alternatively (or after unsuccessfully seeking en banc review), the government could ask the Supreme Court to stay the preliminary injunction. Until the Supreme Court weighs in, whether the CTA’s reporting requirements are effective, and when reporting is due, will remain uncertain.
We encourage reporting companies to check FinCEN’s website regularly for its response to the most recent court order and future court orders. For example, if the district court’s nationwide injunction is not stayed by the Supreme Court or the en banc Fifth Circuit, then we expect that FinCEN will rescind its December 23, 2024, guidance and reissue its previous guidance stating that reporting companies are not required to file beneficial ownership information at this time, but may do so voluntarily.
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