Who’s on First?
Abbott and Costello Routine Revived for Corporate Transparency Act
Much like the beloved and timeless zaniness of the old Abbott and Costello “Who’s on First?” routine, the U.S. Fifth Circuit Court of Appeals has reversed a different panel of that court and reinstated the injunction that had originally been issued by the U.S. District Court for the Eastern District of Texas in the case of Texas Top Cop Shop, Inc. v. Garland, No. 4:24-CV-478. The Texas District Court had determined that there was a likelihood of success on the merits by the plaintiffs in that case to prevail on a constitutional challenge to the Corporate Transparency Act (CTA) which required, as one of its substantive provisions, that all non-exempt “reporting companies” had to file a report of its beneficial owners and other information, and thus entered a nationwide injunction enjoining enforcement of the CTA and its Beneficial Ownership Information Report (BOIR).
The federal government appealed and on December 23, 2024, a motion panel of the U.S. Fifth Circuit Court of Appeals stayed the injunction and directed that each reporting company had to again file the Beneficial Ownership Information Report, albeit with a slight extension of time to do so.
On December 26, 2024, a merits panel of the U.S. Fifth Circuit Court of Appeals briefly addressed the merits of the case. The merits panel weighing in on the matter ruled that “in order to preserve the constitutional status quo while the merits panel considers the parties’ weighty substantive arguments, that part of the motions-panel order granting the Government’s motion to stay the district court’s preliminary injunction enjoining enforcement of the CTA and the Reporting Rule is VACATED.” Thus, the District Court’s nationwide injunction enjoining the enforcement of the CTA and mandatory filing of the BOIR is again on hold pending the substantive determination of the CTA on the merits.
The U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN) published a notice, as a result of the Court of Appeals’ most recent order, that registration was not required at this time, but that voluntary compliance was still available to those who cared to do so.
To follow the progression of the Corporate Transparency Act and the litigation which has taken the spotlight in the past month, please check out these earlier published eLawLines articles:
- Anti-Money Laundering Comes to Main Street (8/9/24)
- Texas Court Taps Brakes on Corporate Transparency Act and Year-End Filings (12/10/24)
- The Corporate Transparency Act is Back On (12/24/24)
With the back and forth of the courts on the enforceability of the Corporate Transparency Act and the filing of the Beneficial Ownership Information Report, it may be difficult for many small and medium-sized businesses to know whether to file or not. While not mandatory at this time, voluntary reporting is permissible. Whether you should voluntarily report poses a number of questions. If you would like to discuss the pros and cons in your particular situation, please contact the attorneys at Jenkins & Kling, P.C. to assist you in your consideration and, if the decision is to go forward, your company’s registration and other compliance obligations. Please contact David Weiss at 314-561-5078 or at [email protected] or Mary Grimes at 314-561-5086 if we may be of service.