December 16, 2024

On December 5, 2024, the Department of Justice (“DOJ”) appealed the December 3, 2024 decision issued by a Texas federal court in Texas Top Cop Shop, Inc., et al. v. Garland, et al. enjoining enforcement of the Corporate Transparency Act (“CTA”) and its Beneficial Ownership Information Reporting Rule (“BOI Rule”). The following week, on December 13, 2024, the DOJ filed an emergency motion in the 5th Circuit Court of Appeals to stay the injunction pending the outcome of its appeal. The government has requested a ruling on the motion by December 27, 2024 in an effort to restore the intended January 1, 2025 filing deadline. Accordingly, the court has set the deadline for the plaintiffs' opposition to the government's motion as December 16, 2024.

While the injunction is in effect, reporting companies will not be subject to liability for failing to file beneficial ownership information with the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (“FinCEN”). They may, however, continue to voluntarily submit beneficial ownership information reports. If the injunction is lifted, those companies that have not yet filed may be given a reasonable amount of time to comply, either by court order or guidance from FinCEN. However, until such order or specific guidance is provided, it is left to reporting companies to decide whether to file now or wait to see how the court case plays out.

As the country awaits the court’s decision whether or not to stay the injunction, and the fate of the CTA in general, it bears mentioning the harsh penalties for failure to comply with the BOI Rule: These include civil penalties of up to $591 per day, and criminal penalties of up to 2 years imprisonment and a fine of up to $10,000.

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