Corporate Transparency Act

The Corporate Transparency Act on Hold Until Further Notice

By Margaret M. Cassidy, Cassidy Law PLLC

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In 2021, Congress passed the Corporate Transparency Act (“CTA”), which required most businesses formed or operating in the United States to file reports with the U.S. Department of Treasury’s Financial Crimes Enforcement NeMwork (“FinCEN”) identifying their beneficial owners.[1] In September of 2022, FinCEN issued the reporting requirements detailing the information that all businesses had to file with FinCEN by January 2025.[2] The CTA was designed to reveal beneficial owners in order to “disrupt financial anonymity” that allowed corruption, money laundering,

drug trafficking, and terrorism to hide behind companies that did not reveal their ownership.[3]

 

Ongoing litigation has derailed the CTA for now.

 

Mazzant Injunction

 

In early December 2024, U.S. District Court for the Eastern District of Texas Judge Amos Mazzant issued a nationwide preliminary injunction (“Mazzant Injunction”) enjoining the CTA and the implementing regulations and declared that reports need not be filed by the filing deadline of January 1, 2025.[4] On December 23, 2024, a three-judge panel of the U.S. Court of Appeals for the Fifth Circuit stayed the preliminary injunction, finding that the injunction would irreparably harm the U.S. government and that businesses who had to file would suffer only minimal harm if required to file.[5] On December 26, 2024, the Fifth Circuit vacated its own order and stayed the injunction to “preserve constitutional issues” pending the Fifth Circuit’s merit panel’s review of the case.[6]

 

Kernodle Injunction

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On January 7, 2025, in another case challenging the CTA, Smith v. U.S. Department of the Treasury, U.S. District Court for the Eastern District of Texas Judge Jeremy Kernodle issued a preliminary injunction (“Kernodle Injunction”), which essentially stayed enforcement of the CTA against the plaintiffs in the case and stayed the January 2025 reporting date nationwide.[7]

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Most Recent CTA Actions

 

On January 23, 2025, the U.S. Supreme Court, acting on the U.S. government’s emergency application, stayed the Mazzant Injunction until the Fifth Circuit makes its final decision and until a petition for a writ of certiorari is filed with the Supreme Court, if one is filed.

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On January 24, 2025, FinCEN issued an alert on its website explaining that since the Kernodle Injunction remains in effect, companies may voluntarily file the CTA beneficial ownership reports but are not required to do so—and they will not be liable for not filing.[8]

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In the Texas Top Cop Shop case, there is a briefing deadline of February 28, 2025, and oral argument is set for March 25, 2025.

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[1] Corporate Transparency Act, 31 U.S.C. § 5336 (2021).

[2] 31 C.F.R. § 1010.380.

[3] Press Release, U.S. Dep’t of the TreasuFy, FACT SHEET: U.S. Department of the Treasury Actions to Prevent and Disrupt Corruption

(https://home.treasury.gov/news/press-releases/jy1974) (Dec. 11, 2023).

[4] Tex. Top Cop Shop, Inc. v. Garland, No. 4:24-CV-478, 2024 WL 5049220 (E.D. Tex. Dec. 5, 2024).

[5] Tex. Top Cop Shop, Inc. v. Garland, No. 24-40792, 2024 WL 5203138 (5th Cir. Dec. 23, 2024).

[6] Tex. Top Cop Shop, Inc. v. Garland, No. 24-40792, 2024 WL 5224138 (5th Cir. Dec. 26, 2024).

[7] Smith v. U.S. Dep’t of the Treasury, No. 6:24-cv-336, 2025 WL 41924 (E.D. Tex. Jan. 7, 2025).

[8] Fin. Crimes EnD’t NeMwork, AleFt, Ongoing Litigation—Texas Top Cop Shop, Inc., et al. v. McHenry, et al., No. 4:24-cv-00478 (E.D. Tex.) & Voluntary Submissions(https://fincen.gov/boi) (updated Jan. 24, 2025).