Supreme Court Lifts One CTA Injunction, But Deadlines Remain Suspended
The Supreme Court has lifted an injunction that blocked enforcement of the Corporate Transparency Act (CTA). However, the CTA’s deadlines remain suspended due to a separate injunction issued in a different case.
On January 23, 2025, the United States Supreme Court overturned a preliminary injunction that paused the federal government’s enforcement of the CTA. The injunction was initially issued by a district court in the case Texas Top Cop Shop, Inc., et al. v. Garland, et al.
The Supreme Court’s decision to overturn the Texas Top Cop Shop injunction appeared to clear the way for the government to implement the CTA. However, a second injunction was entered in a separate case, Smith et al. v. United States Dept. of The Treasury et al., which remains in place. For that reason, the federal government has taken the position that “reporting companies are not currently required to file beneficial ownership information . . . and are not subject to liability if they fail to do so while the [Smith] order remains in force.”
If you are having a hard time following the plot of this CTA melodrama, here is a condensed timeline of where we are and how we got here:
December 3, 2024: A federal district court in the Eastern District of Texas rules the CTA unconstitutional and issues a preliminary injunction blocking its enforcement (Texas Top Cop Shop).
December 5, 2024: The government appeals the decision in Texas Top Cop Shop to the Fifth Circuit Court of Appeals.
December 13, 2024: The government files an emergency motion with the Fifth Circuit to pause the district court’s injunction while the appeal is pending.
December 23, 2024: A motions panel of the Fifth Circuit grants the government’s motion, reinstating CTA’s reporting deadlines. Later that same day, the government voluntarily extended the deadline to January 13, 2025.
December 26, 2024: The Fifth Circuit vacates its earlier decision, reinstating the district court’s injunction.
December 31, 2024: The government files an emergency motion with the Supreme Court to stay the district court’s injunction.
January 7, 2025: A different judge in the Eastern District of Texas issues a nationwide injunction blocking the CTA in Smith v. United States Dept. of the Treasury.
January 23, 2025: The Supreme Court grants the government’s motion in Texas Top Cop Shop, staying the district court’s injunction. However, the Supreme Court does not address the injunction issued in Smith or the CTA’s reporting deadlines.
January 24, 2025: The Financial Crimes Enforcement Network (FinCEN) issues guidance acknowledging the Supreme Court’s decision in Texas Top Cop Shop, while simultaneously noting that—in light of the injunction entered in Smith—“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 [Smith] order remains in force.”
At this point, we are once again left to let the appeals process play out. Although there remains some chance that the Smith injunction will stand, the Supreme Court’s decision in Texas Top Cop Shop suggests that enforcement of the CTA may be imminent. It is possible that the President and/or Congress may soon weigh in on the issue, but the fate of the CTA currently rests with the courts.
Given the uncertainty surrounding the CTA, prudent business owners should begin gathering the information needed to file Beneficial Ownership Information Reports and monitor updates from FinCEN and legal news outlets to ensure compliance with any newly established deadlines.
We will continue to publish updates as they become available. Until then, please contact our office with any questions.
This article was written by Kevin McGrath, a partner in HRMM&L’s Business Law Department. You can reach Kevin at 215.661.0400 or email him at KMcGrath@HRMML.com.
This Client Alert is being provided for informational purposes only, and is not intended and should not be construed as legal advice.