Has the Corporate Transparency Act been struck down by the courts?

The Fifth Circuit affirmed a nationwide injunction blocking enforcement of the CTA in late December 2024. FinCEN announced that companies are not currently required to file beneficial ownership reports. However, the government has sought Supreme Court review, and the injunction could be reversed at any point.

Are businesses currently required to file beneficial ownership reports under the CTA?

As of the Fifth Circuit's December 2024 ruling, businesses are not currently required to file beneficial ownership information reports with FinCEN. However, the government is actively seeking to overturn the injunction, and businesses should continue preparing their reports so they can file promptly if enforcement resumes.

CTA Struck Down Nationwide: Fifth Circuit Affirms Injunction | Lynch Law

The constitutional challenge to the Corporate Transparency Act has reached a decisive moment. On December 26, 2024, a merits panel of the Fifth Circuit Court of Appeals reinstated the nationwide injunction blocking enforcement of the CTA, vacating a stay that a motions panel had granted just three days earlier. The ruling leaves businesses in the same position they have occupied since December 3: not required to file beneficial ownership information reports with FinCEN, but facing an uncertain future as the litigation continues.

The December Procedural History

The sequence of events in December 2024 was extraordinary even by the standards of high-stakes constitutional litigation. On December 3, the district court issued a nationwide preliminary injunction halting CTA enforcement. On December 13, the government filed an emergency motion to stay the injunction. On December 23, a Fifth Circuit motions panel granted the stay, lifting the injunction and reinstating the CTA's reporting requirements. FinCEN immediately announced new filing deadlines for companies that had been relying on the injunction.^[1]

But the relief was fleeting. On December 26, the merits panel assigned to hear the full appeal vacated the motions panel's stay and reinstated the district court's injunction. The merits panel found that the equities favored maintaining the injunction pending full appellate review, given the significant compliance burdens the CTA imposes and the serious constitutional questions the case presents.^[2]

The Constitutional Questions

The Fifth Circuit will ultimately decide whether Congress had the constitutional authority to enact the CTA. The district court found that the statute likely exceeds Congress's powers under the Commerce Clause, the taxing power, and the Necessary and Proper Clause. The court emphasized that the CTA regulates entities created under state law and imposes federal reporting requirements on millions of small businesses that engage in no international activity and present no national security concern.

The government counters that the CTA is a valid exercise of several enumerated powers, including Congress's authority over foreign affairs and national security, its power to regulate interstate commerce, and its authority to enact laws necessary and proper to the exercise of those powers. The government argues that anonymous shell companies facilitate money laundering, terrorist financing, and other illicit activities, and that beneficial ownership reporting is a reasonable means of addressing these threats.

FinCEN's Response

Following the reinstatement of the injunction on December 26, FinCEN updated its guidance to confirm that companies are not currently required to file BOI reports and will not be subject to liability for failing to file while the injunction remains in effect. Companies that wish to file voluntarily may still do so through FinCEN's online filing system, but there is no obligation to do so.^[3]

The Road Ahead

The Fifth Circuit has indicated that it will expedite its consideration of the case on the merits. Briefing is expected to be completed in early 2025, with oral argument likely in the spring. If the Fifth Circuit upholds the injunction, the government will almost certainly seek Supreme Court review. If the Fifth Circuit reverses the injunction, businesses could face reimposed filing deadlines on relatively short notice.

This case is not the only pending challenge to the CTA. Other federal courts are considering similar constitutional challenges, and the possibility of a circuit split could accelerate Supreme Court involvement. The litigation landscape remains highly fluid, and the ultimate resolution of the CTA's constitutionality may not come for months or even years.

What Businesses Should Do Now

Our prior guidance remains sound: businesses should continue preparing to file even though filing is not currently required. The information needed for a BOI report, including the full legal names, dates of birth, residential addresses, and identification document numbers of all beneficial owners, should be compiled and kept current. Businesses with complex ownership structures should identify all individuals who meet the definition of "beneficial owner" under the regulations, including those who exercise substantial control over the entity even if they hold no ownership interest.

We will continue to monitor the CTA litigation and provide updates as this constitutional challenge proceeds through the appellate courts. In the meantime, preparation remains the most prudent course of action.

References

^[1] Texas Top Cop Shop, Inc. v. Garland, No. 24-40792 (5th Cir. Dec. 23, 2024) (motions panel granting emergency stay of preliminary injunction).
^[2] Texas Top Cop Shop, Inc. v. Garland, No. 24-40792 (5th Cir. Dec. 26, 2024) (merits panel vacating stay and reinstating preliminary injunction).
^[3] Financial Crimes Enforcement Network, Beneficial Ownership Information Reporting: Updates (Dec. 2024) (confirming no filing obligation while injunction is in effect).