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Injunction is Back ON; CTA is OFF Again!!

In the “you can’t make this up” category, the Fifth Circuit Court of Appeals has just issued an order VACATING its stay of the injunction applicable to the enforcement of filing requirements under the Corporate Transparency Act.  You can read the order right here Texas Top Cop Shop v Garland 24-40792 (5th Circuit; Stay Vacated).

In other words, the original order enjoining the enforcement of FINCEN’s filing requirements is back on, pending a review of the merits!!

The appeal is now scheduled for oral argument in March (2025).

For reference see:  Injunction is ON; CTA is OFF

and then see:  Injunction is OFF; CTA is Back ON

Now read this post Injunction is Back ON; CTA is OFF Again!!

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CTA Update

Following up on our recent posting concerning the CTA (see CTA On Hold in the US, But . . .   posted on December 9, 2024).

Earlier today (December 23, 2024), the United States Court of Appeals for the Fifth Circuit Order (24-40792) issued its order in response to the emergency appeal by the US government, concerning the nationwide injunction preventing the enforcement of filing requirements under the Corporate Transparency Act (CTA).

In short, the 5th Circuit Court held that since the government met its burden under Nken v. Holder, 556 U.S. 418 (2009), the government’s motion for a temporary stay of the district court’s order and injunction pending appeal was granted. In plain English, the order lifts the injunction imposed by the District Court.

Given the timing of this ruling, FINCEN issued an ALERT updating its Beneficial Ownership Information Reporting deadlines and providing some extensions:

  • The due date for pre-existing companies has been shifted from January 1st to January 13th;
  • For companies that had an initial filing due date while the injunction was in place, their initial filing deadline is now also January 13th;
  • For any company formed while the injunction was in place, FINCEN has allowed an additional 21 days to make their initial filing (i.e., the filing due day changes from 90 days to 111 days); and
  • For any company formed on or after January 1, 2025, the initial filing date will remain as 30 days from notice of formation.

While the 5th Circuit Court’s order lifts the injunction that was previously in effect, this doesn’t decide the matter on its merits and a full hearing and decision is still on the way.  Stay tuned.

 

 

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CTA On Hold in the US, But . . .

Spoiler Alert: Federal Court Enjoined Implementation and Enforcement!

Additional Spoiler Alert: NY LLC Transparency Act Unaffected (so far)!

The US Federal Corporate Transparency Act (CTA) * was enacted into law in January of 2021, in an effort to bolster the ability of law enforcement and intelligence agencies, as well as financial institutions to be better able to identify and prevent the use of empty shell holding companies to disguise the movement of illicit funds (e.g., money laundering, financing terrorism, drug trafficking, etc.). The CTA requires certain business entities to report and file beneficial ownership information with the Financial Crimes Enforcement Network (FinCEN).

New York State has enacted a similar statute, which was amended on March 1, 2024. The New York LLC Transparency Act (NYLTA) was originally enacted on December 22, 2023, and amended by Chapter Amendment on March 1, 2024 [New York Limited Liability Company Law, Sections 1106-1108, effective January 1, 2026], requires limited liability companies (LLCs) that are or have been formed under New York law or are or wish to be qualified and authorized to do business in the State of New York to provide information to the New York Department of State disclosing the LLCs beneficial owners.  While there are certain exemptions and exclusions under both the Federal and New York State laws, there are some other key differences. The NYLTA:

Becomes effective January 1, 2026, not 2025 as the Federal law provides, and any LLC formed in or qualified to do business in New York after January 1, 2026, has 30 days from formation (or qualification) to file.  If your LLC was formed or qualified to do business in NYS before January 1, 2026, you will have until January 1, 2027, to make your initial filings.
Applies only to LLCs, not any other types of businesses, such as corporations, limited partnerships or statutory trusts.
On December 3, 2024, a federal district court in the Eastern District of Texas, Sherman Division, issued an order granting a nationwide preliminary injunction: (1) enjoining enforcement of the CTA, as well as the implementation of the reporting requirements applicable to beneficial ownership information;  and (2) staying all deadlines required to comply with the statute’s reporting requirements.  You can read the amended order granting the injunction here: Texas Top Cop Shop, Inc., et al. v. Merrick Garland, Attorney General of the United States (E.D. Tex., No. 4:24-cv-00478). The Department of Justice, on behalf of the Department of the Treasury, is appealing the ruling, but in the meantime FinCEN must comply with the order while it is still in effect.

Although this means that until the litigation is resolved or the injunction is lifted, companies otherwise required to file will not be subject to any liability if they fail to do so. That said, any company that wants to voluntarily file their beneficial ownership information reports may do so.

IMPORTANT NOTE: Although the NYLTA doesn’t come into effect until January of 2026, the Federal injunction does not appear to affect the NY Statute.

With thanks to James (“Jamie”) Ballard for keeping me up to date.

Stay tuned!

* (Public Law 116-283, Title LXIV of the National Defense Authorization Act for Fiscal Year 2021 (Division F) and is part of the Anti-Money Laundering Act of 2020 (AML Act). The substantive provisions of the CTA can be found in Sections 6401, 6402 and 6403 (this latter section adds § 5336 to Title 31 of the United States Code establishing the Beneficial Ownership Information Reporting Requirements).