The U.S. Supreme Court has issued an emergency stay on the nationwide injunction on the Corporate Transparency Act (CTA), issued in the case Texas Cop Shop v. Garland. This stay halts the nationwide injunction (which blocked enforcement of the CTA) issued by the U.S. District Court for the Eastern District of Texas on December 5, 2024. While this initially led to the assumption that CTA reporting deadlines were back in effect, this is not the case.
Supreme Court Stay and Nationwide Injunction
The emergency stay issued by the Supreme Court, with 8 out of 9 justices reportedly voting in favor, will remain active until the Fifth Circuit Court of Appeals rules on the constitutionality of the CTA. The Fifth Circuit is set to hold oral arguments on March 25, 2025. Whichever party receives an unfavorable ruling is likely to petition for a writ of certiorari, requesting the Supreme Court to review the decision. If the Supreme Court grants this request, the stay will remain in effect until a final judgment is issued. Should the Supreme Court decline to review, the Fifth Circuit Court's ruling will stand, and the stay will terminate automatically.
Smith v. U.S. Department of the Treasury Still Standing
It is important to understand that reporting under the CTA is still voluntary. This is due to a separate legal challenge: the Texas case Smith v. U.S. Department of the Treasury. In early January, the court issued a stay on the effective date of the BOI reporting rule. This stay was granted under Rule 705, which allows courts to delay the implementation of a rule until the case is resolved. The Smith case stay is independent and remains unaffected by the Supreme Court’s recent ruling.
While the Smith case has not yet been appealed, an appeal appears imminent. The stay issued could be overturned, particularly given the Supreme Court's actions in the Texas Cop Shop case.
FinCEN’s Position and Potential Extensions
The Financial Crimes Enforcement Network (FinCEN) has acknowledged the emergency stay issued on January 23rd and that the stay on the effective date in a separate case is still standing. Here is what FinCEN posted to their BOI Homepage:
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.
We are advising clients to finish providing the information needed to complete reporting if you have not done so. Otherwise, it may be important to reconsider whether you want to file now or continue to wait for a conclusion. The US Supreme Court case had 8 out of 9 justices agreeing with removing bars to enforcement, so there seems to be growing momentum towards the filing requirements being back on soon, although, an outcome is ultimately uncertain.