In an unexpected “plot twist” to the enforceability of the Corporate Transparency Act (CTA), on December 26, 2024, a panel of a federal appeals court vacated the stay of the motions panel of the federal appeals court that had been granted only three days earlier. In effect, the enforceability of the CTA has once again been paused while the merits panel of the same federal appeals court considers an expedited substantive challenge to the CTA.1
Accordingly, the beneficial ownership information (BOI) reporting requirement of the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN) has, once again, been enjoined, and reporting companies are not required to file BOI reports at this time. FinCEN has subsequently acknowledged that reporting companies may continue to voluntarily submit, but are not subject to liability if they fail to do so while the order remains in force.
It has been a busy month for FinCEN and the courts considering the CTA, leaving many heads spinning. To help make sense of the various plot twists, here’s a summary of this challenge to the CTA:
In light of the actions described above, we recommend that companies continue preparations to comply with the CTA, pending the outcome of the appeal.
As described in our prior newsletters on December 24, 2024, December 9, 2024, August 9, 2024 and December 1, 2023, Congress passed the CTA as part of an anti-money laundering package in the 2021 National Defense Authorization Act (NDAA), with the aim of curbing illicit financial activities, including tax evasion, money laundering, drug trafficking and terrorist financing. Under the CTA, many corporations, limited liability companies, limited partnerships and similar legal entities are required to report BOI to FinCEN.
For additional information relating to the CTA, visit FinCEN’s BOI web page.
1 In the case of Texas Top Cop Shop, Inc. v. Garland, et al., No. 4:24-cv-00478.
2 Enacted as part of the FY2021 NDAA, including the Anti-Money Laundering Act of 2020.