Fifth Circuit Reinstates Injunction of the Corporate Transparency Act; DOJ Petitions Supreme Court Seeking Stay of Injunction During Appeal

Background

As described in our prior client alert, on December 3, 2024, the U.S. District Court for the Eastern District of Texas issued an opinion and order  enjoining the federal government from enforcing the CTA and a rule implementing it.  The rule (BOI Rule) requires certain entities formed or registered to do business in the U.S. (Reporting Companies) to report information about themselves and their natural-person beneficial owners to the Financial Crimes Enforcement Network (FinCEN), a bureau of the U.S. Department of the Treasury that administers anti-money laundering laws.  Then, on December 13, 2024, DOJ filed an “Emergency Motion for Stay Pending Appeal” in the Fifth Circuit asking that court to stay the District Court’s injunction pending appeal, or, in the alternative, to narrow the District Court’s injunction to members of the National Federation of Independent Business.

Since the DOJ filed its notice of appeal and emergency motion in the Fifth Circuit, several notable events have occurred. 

Fifth Circuit Developments:

• On December 23, 2024, a Fifth Circuit panel granted DOJ’s emergency motion, issuing a stay of the nationwide injunction pending the Fifth Circuit’s review of the merits of DOJ’s appeal of the injunction. This had the effect of reinstating the BOI reporting requirement.
• After the Fifth Circuit’s stay, FinCEN announced that it would extend the reporting deadlines under the BOI Rule. FinCEN (1) extended the reporting deadline for reporting companies in existence before 2024 from January 1, 2025, to January 13, 2025; (2) extended the deadline for reporting companies created or registered on or after September 4, 2024, that had a filing deadline between December 3, 2024, and December 23, 2024, to January 13, 2025; and (3) and gave reporting companies created or registered on or after December 3, 2024, and on or before December 23, 2024, an additional 21 days from their original filing deadline to report.
• On December 26, 2024, a separate panel of the Fifth Circuit reversed course, vacating the court’s stay of the nationwide injunction issued days before and reinstating the nationwide injunction until the Fifth Circuit hears arguments on the merits of the DOJ’s appeal.  FinCEN has since updated the notice on its website to say that “reporting companies are not currently required to file beneficial ownership information with FinCEN and are not subject to liability if they fail to do so while the order remains in force.” FinCEN will continue to accept BOI reports on a voluntary basis.
• The Fifth Circuit issued an expedited briefing and oral argument schedule under which briefing is to be completed by February 28, 2025, and oral arguments to occur on March 25, 2025.

Supreme Court Appeal

After the Fifth Circuit reinstated the nationwide injunction, the DOJ filed an emergency “Application for a Stay of the Injunction Issued by the United States District Court for the Eastern District of Texas” (Application) to the U.S. Supreme Court (Supreme Court).  In the Application, the DOJ asked the Supreme Court to stay the nationwide injunction pending DOJ’s appeal to the Fifth Circuit, and, if the Fifth Circuit affirms in whole or in part the district court’s injunction, to stay the injunction while the DOJ seeks a writ of certiorari in the Supreme Court and through resolution of any resulting proceedings in the Supreme Court.  The DOJ further asked, “at a minimum,” that the Supreme Court stay the impact of the injunction beyond the named plaintiffs and the individual members of the one trade association plaintiff, the NFIB.

Finally, the Application states that the Supreme Court may wish to treat the Application itself as a petition for a writ of certiorari before judgement presenting the limited question of whether the district court had the authority to issue universal relief through a nationwide injunction, and to resolve that issue during this term.  The Supreme Court has asked plaintiffs to respond to the Government’s request by January 10, 2025.

Implications for Reporting Companies

Barring further intervention by the Supreme Court, it is likely that the nationwide injunction will continue through at least March 25, 2025, the scheduled date for oral arguments before the Fifth Circuit. 

The Supreme Court is not required to address the DOJ’s Application, though it may do so on a discretionary basis, and on a timeline of its choosing.  Considering that multiple U.S. appeals courts are presently hearing appeals regarding the CTA, the potential for contrary appellate rulings remains, which increases the likelihood of the Supreme Court deciding to review the issue.   

If the Supreme Court does grant a stay of the injunction, FinCEN’s updated reporting deadlines could become immediately applicable, or FinCEN may choose to again extend the reporting deadlines.  Reporting companies that have not yet reported to FinCEN may wish to prepare to comply with the reporting requirements quickly in the event that the stay is lifted and no extension (or only a short extension) is granted. 

Crowell & Moring will continue to monitor the status of these proceedings and any further FinCEN announcements, and will provide updates as appropriate.