TheCorporateCounsel.net

Yesterday, Gibson Dunn shared this update on the litigation challenging the constitutionality of the CTA:

On December 11, the Department of Justice, on behalf of the Financial Crimes Enforcement Network (FinCEN), filed a motion in the U.S. District Court for the Eastern District of Texas requesting that the court stay its preliminary injunction pending the government’s appeal to the Fifth Circuit Court of Appeals. The district court ordered the plaintiffs to respond to that stay motion by December 16.

In the meantime, on December 13, the government also filed a motion in the Fifth Circuit asking that court to stay the district court’s order pending appeal or, in the alternative, to narrow the scope of the court’s injunction to cover only the members of plaintiff National Federation of Independent Business (NFIB) rather than every reporting entity in the country. . . .

The government requested a ruling from the Fifth Circuit “no later than December 27, 2024, to ensure that regulated entities can be made aware of their obligation to comply before January 1, 2025.”  The Fifth Circuit set a briefing schedule calling for a response from the plaintiffs by December 17 and a reply from the government by December 19.

What does this mean for entities subject to the CTA?

[G]iven the possibility of the district court’s order being stayed pending appeal, reporting entities’ legal obligations are subject to change on short notice.  Either the district court or the Fifth Circuit could grant the government’s stay request before the end of the year.  If the Fifth Circuit denies the government’s stay request, the government could request that relief from the Supreme Court.  If the district court’s order is stayed pending appeal, the CTA’s beneficial ownership information (BOI) Reporting Rule will become enforceable again.  If the district court’s order is narrowed to cover only the plaintiffs and members of the NFIB, the plaintiffs and NFIB’s approximately 300,000 members will receive the benefits of the preliminary injunction, but the law would become effective with respect to all other reporting entities.

The government’s stay applications in the district court and Fifth Circuit signal that if it succeeds in winning a stay of the district court’s order by December 27, there is a possibility that the government might try to enforce the January 1, 2025 reporting deadline for companies created or registered to do business in the United States before January 1, 2024.  It also remains possible that FinCEN will extend that deadline.

Stay tuned!

– Meredith Ervine