Supreme Court Stays Corporate Transparency Act Injunction, But Beneficial Ownership Reporting Requirements Remain Paused

The Supreme Court Decision in Top Cop Shop

On January 23, 2025, the U.S. Supreme Court granted the Government’s application for a stay of an injunction issued by the U.S. District Court for the Eastern District of Texas in Texas Top Cop Shop. The injunction had blocked enforcement of the CTA and implementation of the related BOI Rule, which required 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 Treasury Department. The Supreme Court stayed the Texas Top Cop Shop injunction “pending the disposition of the [Government’s] appeal in the United States Court of Appeals for the Fifth Circuit and disposition of a petition for a writ of certiorari.” For more information on the events leading up to the Supreme Court’s review and decision to stay the injunction, please see our prior alerts here, here, and here.

Oral arguments before the Fifth Circuit are scheduled for March 25, 2025.

The Smith Decision and FinCEN Guidance

However, while the Supreme Court was considering the Government’s application in Texas Top Cop Shop, on January 7, 2025, a different federal district court judge in the Eastern District of Texas granted a motion to preliminarily enjoin enforcement of the CTA as to the two named plaintiffs and their related entities in a separate case (the Smith Order).[1] More importantly, the Smith court also stayed the effective date of the BOI Rule in its entirety, and did not limit this part of the Smith Order to the named plaintiffs and their associated entities.[2] As a result, the BOI Rule is on pause nationwide.

On January 24, 2025, FinCEN issued an update saying that, despite the Supreme Court’s ruling in Texas Top Cop Shop, because the separate nationwide order in Smith remains in place, “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. However, reporting companies may continue to voluntarily submit beneficial ownership information reports.”

In addition, notwithstanding the Supreme Court’s Texas Top Cop Shop ruling and the Smith Order, the Government remains enjoined from enforcing the BOI Rule against the National Small Business Association (and its individual members as of March 1, 2024), and the named plaintiffs in a separate case in the Northern District of Alabama (the NBSU case).[3] The NSBU case is on appeal to the 11th Circuit Court of Appeals. 

Implications

For now, the BOI Rule remains on pause. That said, we anticipate that the Government may request reconsideration of the Smith Order, ask for a stay of the Smith Order pending appeal, or seek a stay of the Smith Order from the Fifth Circuit Court of Appeals, based on the Supreme Court’s holding in the Texas Top Cop Shop case.

So, for now, Reporting Companies that have not yet reported to FinCEN are not required to report any BOI to FinCEN, but may wish to be prepared to comply with the BOI reporting requirements quickly in case the Smith Order is lifted or narrowed with a short timeline for compliance. In particular, Reporting Companies may wish to (1) confirm if FinCEN’s reporting requirements apply to them, (2) identify those individuals that must be reported as beneficial owners, (3) collect all necessary information (including required personal identifying information about beneficial owners), and (4) prepare the required report.

Crowell & Moring will continue to monitor the status of Corporate Transparency Act developments and will provide updates as appropriate.