19/12/24

US: Corporate Transparency Act Remains Blocked Despite DOJ Stay Request

As published on: acainternational.org, Thursday 19 December, 2024.

The court’s nationwide injunction in early December put the Jan. 1, 2025, filing deadline for beneficial ownership information on hold. This week a Texas judge denied the government’s request to stay the injunction, though the act’s future isn’t certain.

On Dec. 17, a judge in the U.S. District Court for the Eastern District of Texas ruled that the Corporate Transparency Act (CTA) will remain blocked pending the U.S. Department of Justice’s (DOJ) appeal of the nationwide injunction, Bloomberg reports.

This is the latest development in the act’s rollercoaster history. Here is a brief timeline of events so far:

Jan. 1, 2024: The CTA goes into effect. It is intended to prevent money-laundering and other illicit activity, and requires U.S. companies to report their “beneficial owners” to the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) by Jan. 1, 2025, ACA International previously reported.

May 28, 2024: A group of six plaintiffs file a lawsuit, Texas Top Cop Shop, Inc. v. Garland, alleging that the CTA inappropriately regulates incorporated entities beyond Congress’s constitutional commerce clause authority, regardless of the entities’ commercial activities.

Dec. 3, 2024: U.S. District Judge Amos Mazzant rules in favor of the plaintiffs by concluding the CTA is likely unconstitutional. He imposes a nationwide preliminary injunction that blocks enforcement of the CTA. This means businesses do not have to comply with the Jan. 1, 2025, filing deadline.

Dec. 5, 2024: The U.S. Treasury Department appeals Mazzant’s order.

Dec. 12, 2024: The district court orders the plaintiffs to submit their response to the government’s motion by noon CT on Monday, Dec. 16, 2024.

Dec. 13, 2024 The DOJ files an emergency motion with the U.S. Court of Appeals for the 5th Circuit to stay the injunction. On that same day, Holland & Knight reported, “the 5th Circuit, on its own initiative, accelerated the briefing schedule the DOJ had proposed so that the appellate court would be able to fully consider the issues by Dec. 19.”

That brings us to the Texas court’s decision on Dec. 17.

According to Holland & Knight, “it is possible that by Dec. 20 or soon thereafter the Fifth Circuit will rule to stay the nationwide preliminary injunction on enforcement of the CTA and its reporting rules and reimpose the BOI reporting rules, particularly the deadline of Jan. 1, 2025, for reporting companies formed prior to Jan. 1, 2024, to file their BOI reports.”

Businesses should be prepared, Holland & Knight noted: “Subject to a pending decision by the Fifth Circuit—and a possible subsequent ruling by the U.S. Supreme Court in the event of an emergency application—pre-2024 reporting companies that have not yet completed their BOI initial reports should take steps to gather relevant information, finalize their BOI reports for filing and be ready to file by Jan. 1, 2025, if the Fifth Circuit were to stay the order of the district court.”

Lawmakers have pushed for delays in the financial reporting requirements through legislation, ACA previously reported. A bipartisan bill introduced by U.S. Rep. Zach Nunn, R-Iowa, in August 2024 sought to delay the reporting requirements by one year.

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US Corporate Transparency DOJ