Fifth Circuit vacates stay of Corporate Transparency Act injunction, again putting deadlines on hold

On December 26, 2024, the US Court of Appeals for the Fifth Circuit vacated the stay entered by a motions panel days earlier, which would have allowed the government to enforce the Corporate Transparency Act (CTA) while it appeals a lower court's ruling.

The latest decision reinstates the district court's nationwide preliminary injunction that halted enforcement of the CTA, including the requirement to file beneficial ownership information (BOI) reports.

The Fifth Circuit has yet to consider the government’s appeal on the merits, which is expected after briefing and argument in March 2025. The CTA may or may not be reinstated after a Fifth Circuit merits decision or potential further appeal to the Supreme Court of the US. Due to this uncertainty, we encourage all entities subject to the CTA’s reporting requirements (reporting companies) to preserve or continue gathering their BOI.

Background

This Fifth Circuit’s order in Texas Top Cop Shop, Inc. v. Garland is the latest development in litigation over the CTA. The US District Court for the Eastern District of Texas ruled on December 3, 2024 that the CTA is likely unconstitutional and issued a nationwide preliminary injunction against its enforcement. The government then sought an emergency stay of the injunction. On December 23, 2024, a motions panel of the Fifth Circuit granted the stay pending appeal, allowing the government to enforce the CTA (read more about that holding here). Plaintiffs then petitioned for extraordinary relief, asking the Fifth Circuit to rehear the motions panel’s stay order on an expedited basis.

Recent developments in the Fifth Circuit

In an order issued by the Clerk of Court on behalf of the Court late on December 26, 2024, the Fifth Circuit vacated the motions panel’s order insofar as it stayed the district court’s preliminary injunction. The Clerk’s order states that the stay is vacated to preserve the “constitutional status quo while the merits panel considers the parties’ weighty substantive arguments” on an expedited basis.

Briefs are currently due in February 2025. Oral argument has been set for March 25, 2025.

Implications for reporting companies

With the Fifth Circuit's latest order, the CTA and the Reporting Rule are once again subject to a nationwide preliminary injunction.

The Department of the Treasury's Financial Crimes Enforcement Network (FinCEN) had previously extended the deadline for certain companies to file beneficial ownership reports to January 13, 2025, but, with the reinstatement of the preliminary injunction, that deadline and all other reporting deadlines under the CTA are on hold. Unless and until a further court order lifts the preliminary injunction, the reporting deadlines are not subject to enforcement.

Plaintiffs with appeals pending before other circuit courts are also taking notice and may seek expedited review of their cases in parallel. Injecting further uncertainty, it is possible, although relatively unlikely, that the government will seek an interim stay of the preliminary injunction from the Supreme Court.

Next steps

As of the date of publication, reporting companies do not need to file BOI reports while the nationwide preliminary injunction is in effect. They are encouraged, however, to ensure that they are positioned to move quickly to comply with the CTA if and when the injunction is lifted (read more about our guide to the CTA here). Reporting companies are also encouraged to monitor the situation closely and consult with legal counsel to ensure they are prepared for any changes. DLA Piper's CTA working group will continue to provide updates and guidance on this evolving legal landscape.

For additional guidance regarding the CTA, ongoing litigation, and the status of the CTA, please contact your DLA Piper relationship partner or any of the authors of this alert.