Recent Developments Involving the Corporate Transparency Act

QUESTION: When the Corporate Transparency Act was enacted, it included a requirement that, starting in 2024,  most small and medium-sized businesses must submit a Beneficial Ownership Information (“BOI”) report to the Financial Crimes Enforcement Network (“FinCEN”). I have heard about some recent court decisions that may affect the obligation of real estate firms to submit that report. What can you tell me about the latest developments?

ANSWER: The short answer is that, for now, the obligation to submit BOI reports has been put on hold.

In early November, we wrote a Q&A about the requirements imposed by the Corporate Transparency Act (the “CTA”). You can access that Q&A here.

On December 3rd, Judge Amos L. Mazzant, III, of the United States District Court for the Eastern District of Texas, issued a nationwide preliminary injunction which enjoined enforcement of the CTA. The issuance of that injunction meant that the reporting requirements set forth in the CTA were put on hold. While companies were permitted to continue submitting BOI reports, and while FinCEN continued to accept them, the obligation to do so was suspended.

FinCEN appealed Judge Mazzant’s decision to the United States Court of Appeals for the Fifth Circuit. On December 23, a three-judge panel of the Fifth Circuit granted FinCEN’s motion to lift (or stay) the temporary nationwide injunction. That ruling briefly reinstated the BOI Reporting Rule and imposed a January 13, 2025 deadline for companies to submit their BOI reports.

The latest and most significant development occurred three days later. On December 26, 2024, the entire Fifth Circuit issued an order stating that it was acting to preserve the status quo while FinCEN’s appeal is considered on the merits. The Order vacated that part of the previous panel’s order that had granted the Government’s motion to stay the nationwide injunction. This latest ruling means that, once again, FinCEN has been prevented from enforcing the CTA and its BOI Reporting Rule. FinCEN has published a notice on its website acknowledging that reporting companies are not currently required to file BOI reports with FinCEN and are not subject to liability if they fail to do so while the Fifth Circuit’s order remains in force.

At this point, it is not clear what the Fifth Circuit will do when it rules on the merits of the Government’s appeal. That appeal will be heard on an expedited basis and we suggest that you stay tuned for further updates.

Release Date: 1/9/2025