Corporate Transparency Act Preliminary Injunction PLACED ON HOLD

Earlier today, the 5th Circuit overturned the nationwide injunction on CTA reporting. Accordingly, entities formed before this year now have just one week to file their reports. 

You may read the entire opinion here.

Here is an excerpt from the opinion:

The Corporate Transparency Act (“CTA”) obliges certain nonexempt companies to report the identity of their beneficial owners and applicants for incorporation. 31 U.S.C. § 5336. On December 3, 2024—less than one month before the crucial January 1, 2025 reporting deadline—the district court granted Plaintiffs-Appellees’ (the “Businesses”) motion for a preliminary injunction and entered a nationwide injunction enjoining the CTA and the corresponding Reporting Rule. Id.; 31 C.F.R. § 1010.380. The district court concluded that both are unconstitutional and issued nationwide injunctions against each, despite no party requesting it do so and despite every other court to have considered this issue tailoring relief to the parties before it or denying relief altogether. . . .

When balancing this harm against the public’s urgent interest in combatting financial crime and protecting our country’s national security, equity favors a stay. As the government explains, and the district court recognizes, a last-minute nationwide preliminary injunction would undermine our ability to push other countries to reform their anti-money laundering and counterterrorism regimes and to address the most fundamental gap in our own regime.

Accordingly, the government has demonstrated that a stay is warranted. See Nken, 556 U.S. at 434.

IT IS ORDERED that the government’s emergency motion for a stay pending appeal is GRANTED. IT IS FURTHER ORDERED that this appeal is EXPEDITED to the next available oral argument panel.

Footnote 7 is also worth examining:

The Businesses warn that lifting the district court’s injunction days before the compliance deadline would place an undue burden on them. They fail to note, however, that they only filed suit in May 2024 and the district court’s preliminary injunction has only been in place for less than three weeks as compared to the nearly four years that the Businesses have had to prepare since Congress enacted the CTA, as well as the year since FinCEN announced the reporting deadline.

Here is an excerpt from a FinCen memo:

Reporting companies that were created or registered prior to January 1, 2024 have until January 13, 2025 to file their initial beneficial ownership information reports with FinCEN. (These companies would otherwise have been required to report by January 1, 2025.)

https://lawprofessors.typepad.com/trusts_estates_prof/2024/12/corporate-transparency-act-preliminary-injunction-placed-on-hold.html