Fifth Circuit Vacates Stay of Injunction Against Enforcement of the Corporate Transparency Act – Nationwide Preliminary Injunction Once Again in Effect

As we previously discussed, on December 5, 2024, the Department of Justice (“DOJ”), representing the Department of the Treasury, submitted a notice of appeal to the U.S. Court of Appeals for the Fifth Circuit, challenging a memorandum opinion and order issued by Judge Mazzant of the U.S. District Court for the Eastern District of Texas. The opinion and order granted a nationwide preliminary injunction against the Corporate Transparency Act (“CTA”), blocking implementation of the CTA in its entirety.

On December 23, 2024, a Fifth Circuit motions panel issued an order granting the DOJ’s motion for a stay of the injunction pending appeal. In response to the Fifth Circuit panel’s order, on December 23, 2024, FinCEN issued additional guidance, providing a short grace period (to January 13, 2025) and extending reporting deadlines for reporting entities.

On December 26, 2024, a Fifth Circuit merits panel vacated the motions panel’s stay of the injunction. As a result, the preliminary nationwide injunction against the enforcement of the CTA is once again in effect. On December 27, 2024, the Fifth Circuit scheduled the appeal for oral argument in late March 2025, meaning the injunction will likely remain in effect until the Fifth Circuit issues an opinion on the merits after the oral arguments, absent intervention by the en banc Fifth Circuit or the Supreme Court.

On December 27, 2024 FinCEN responded to the Fifth Circuit merits panel decision, concluding the following:

[R]eporting 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 order remains in force. However, reporting companies may continue to voluntarily submit beneficial ownership information reports.

It is possible that the DOJ may pursue additional remedies, such as seeking a review by the full Fifth Circuit or an emergency stay from the U.S. Supreme Court. Pending further developments, V&E still recommends that clients continue to assess the applicability of reporting requirements under the CTA and be prepared to make any required filings if there is any change in CTA compliance requirements.

On December 31, 2024, the Solicitor General asked the Supreme Court to stay the District Court’s injunction. As of the time of this alert, the Supreme Court has not yet taken any action on that request.

Disclaimer: This update was prepared as of December 31, 2024, and is subject to change as further guidance on the CTA develops. This is only a summary of a complex regulatory system and is not legal advice. Specific questions regarding the CTA should be directed toward your V&E relationship attorney.

This information is provided by Vinson & Elkins LLP for educational and informational purposes only and is not intended, nor should it be construed, as legal advice.