CORPORATE TRANSPARENCY ACT UPDATE: Fifth Circuit Vacates Prior Stay Order and Reinstates Injunction Against Corporate Transparency Act Enforcement

By Kayla M. Kuri

Kayla M. Kuri

The Fifth Circuit Court of Appeals, in an order issued on December 26^th, has vacated its own stay of the injunction granted by the U.S. District Court for the Eastern District of Texas halting the enforcement of the Corporate Transparency Act (“CTA”) and its upcoming filing deadlines. This decision reverses the court’s earlier ruling that had lifted the injunction granted by the U.S. District Court for the Eastern District of Texas in the Texas Top Cop Shop, Inc., et al. v. Garland decision, thereby halting the implementation of the CTA’s reporting requirements pending further judicial review (for more information about the prior injunction granted by the district court, please click here).

In the December 26^th order issued by the Fifth Circuit, the court reasoned that the “constitutional status quo” should be maintained until the merits of the case were decided. While this decision gives those that have been following the Texas Top Cop Shop, Inc. case a bit of whiplash, it does provide relief to businesses that would otherwise be required to make their beneficial ownership filings by the January 13^th deadline established by the Financial Crimes Enforcement Network (“FinCEN”) after the Fifth Circuit’s December 23^rd order which reinstated the CTA’s reporting requirements (for more information on the Fifth Circuit’s prior order, please click here).

What You Need to Know

The Fifth Circuit’s December 26^th order effectively reinstated the nationwide injunction previously granted by the U.S. District Court for the Eastern District of Texas.  This reinstatement effectively pauses the implementation of the CTA’s reporting requirements until the court reaches a final decision on the merits of the case (meaning that businesses are not presently required to submit their beneficial ownership filings to FinCEN, as required by the CTA).

Next Steps

The Fifth Circuit has expedited the appeal of the Texas Top Cop Shop, Inc. case and is expected to hear oral arguments soon. Businesses should stay informed about the developments in this case, as the court’s final decision will determine the future enforcement of the CTA’s reporting requirements.

The legal landscape surrounding the Corporate Transparency Act remains dynamic. The reinstatement of the injunction by the Fifth Circuit underscores the ongoing constitutional debates associated with the CTA. Businesses are advised to monitor this situation closely and consult with legal counsel to ensure compliance with any future requirements. Phillips Murrah is continuing to closely monitor developments in this area and will provide updates on any changes in the reporting requirements. If you have any questions about the CTA, please contact Kayla Kuri at kmkuri@phillipsmurrah.com or your regular Phillips Murrah representative.