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Corporate Transparency Act: To File or Not to File?

December 23, 2024

Thomas C. Carey | Partner, Business Chair View more articles

Thomas is a member of our Business Practice Group

Photo credit: Mikkelwilliam via Getty Images

The Corporate Transparency Act (CTA) requires most small companies doing business in the United States to disclose information about their beneficial owners to the Financial Crimes Enforcement Network (FinCEN), by January 1, 2025. In April 2024, we reported on an Alabama district court case that held the CTA to be unconstitutional. That ruling was of limited geographic scope.

On December 3, 2024, the U.S. District Court for the Eastern District of Texas granted a nationwide preliminary injunction that enjoins the federal government from enforcing the CTA. The district court reasoned that the CTA is probably unconstitutional because it falls outside of the legislative powers of Congress.

On December 23, 2024 a panel of the U.S. Court of Appeals for the Fifth Circuit stayed the district court’s decision, but the decision was reversed by another panel of the 5^th Circuit on December 26. The 5^th Circuit has scheduled a hearing on the merits to be held on March 25, 2025. Thus, it is likely that no CTA filings will be necessary at least until then.

On January 23, 2025, the Supreme Court granted a stay of the December 23, 2024 injunction, but the ruling did not affect a similar injunction issued on January 7, 2025 by a different federal judge. Thus, an injunction now remains in place as of January 23, 2025. The Fifth Circuit Court of Appeals is likely to provide a more definitive ruling later this year, a ruling that either party might appeal to the Supreme Court.

If you are a Sunstein client and have questions about this law and its applicability to you, feel free to contact me at tcarey@sunsteinlaw.com.