Supreme Court Grants Stay of Preliminary Injunction Against Corporate Transparency Act – Second Injunction Still In Effect

On January 23, 2025, the Supreme Court granted the government’s motion to stay a nationwide injunction that was issued by a Texas federal judge in the case Texas Top Cop Shop, Inc. v. McHenry. As we discussed previously, prior to the Supreme Court’s order, the Corporate Transparency Act (“CTA”), which requires certain entities to report their beneficial ownership information to the Financial Crimes Enforcement Network (“FinCEN”), was blocked by a nationwide preliminary injunction. The government has since appealed that ruling, and the case is now before the Fifth Circuit.

Although the Supreme Court stayed the injunction issued in Texas Top Cop Shop, a separate nationwide order delaying the implementation of the CTA’s reporting requirements, issued on January 7, 2025, by another federal judge in Texas (Smith v. U.S. Department of the Treasury), remains in effect. As a result, reporting companies are not currently obligated to file beneficial ownership information with FinCEN, despite the Supreme Court’s recent decision.

Since the order, FinCEN has issued new guidance to reporting companies on how this injunction affects their compliance with the CTA. In relevant part, FinCEN stated:

On January 23, 2025, the Supreme Court granted the government’s motion to stay a nationwide injunction issued by a federal judge in Texas (Texas Top Cop Shop, Inc. v. McHenry—formerly, Texas Top Cop Shop v. Garland). As a separate nationwide order issued by a different federal judge in Texas (Smith v. U.S. Department of the Treasury) still remains in place, reporting companies are not currently required to file beneficial ownership information with FinCEN despite the Supreme Court’s action in Texas Top Cop Shop. Reporting companies also are not subject to liability if they fail to file this information while the Smith order remains in force. However, reporting companies may continue to voluntarily submit beneficial ownership information reports.

Conclusion

Previously, when the Fifth Circuit motions panel issued an order granting the DOJ’s motion for a stay of the injunction, FinCEN issued guidance and provided a short grace period (from January 1, 2025 to January 13, 2025) and extended reporting deadlines for reporting entities. While it is not entirely certain, we believe that it is possible that FinCEN will provide a similar grace period should the second injunction be stayed as well. Accordingly, V&E recommends that clients continue to assess the applicability of reporting requirements under the CTA and be prepared to make any required filings promptly following any resolution of the Smith order or other applicable developments.

We will continue to monitor developments in the case and the response from FinCEN and will update our clients as appropriate. We also encourage our clients to contact their V&E client coverage teams to discuss ongoing compliance with the CTA.

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.