This alert has been updated to reflect guidance from FinCEN on January 24, 2025.  

On January 23, 2025, the U.S. Supreme Court ruled on the enforcement of the Corporate Transparency Act (CTA) and lifted a pending injunction preventing the Financial Criminal Enforcement Network (FinCEN) from enforcing the law. The order, which addresses the nationwide injunction imposed by a Texas District Court in Texas Top Cop Shop, Inc. v. McHenry, was issued by Justice Samuel Alito, with a concurring opinion by Justice Neil Gorsuch and a dissenting opinion by Justice Ketanji Brown Jackson. The order did not provide any justification for granting the requested stay of the injunction, but it is a significant win for the government, which repeatedly had sought to lift the nationwide injunction. 

The day after the Supreme Court order, FinCEN issued an alert on its website stating: 

In light of a recent federal court order, reporting companies are not currently required to file beneficial ownership information with FinCEN and are not subject to liability if they fail to do so while the order remains in force. However, reporting companies may continue to voluntarily submit beneficial ownership information reports.

FinCEN's guidance reflected a separate nationwide injunction in Smith v. U.S. Department of Treasury, where a different Texas district court judge on January 7, 2025, ordered a stay of the effective date of the CTA's reporting rule for the pendency of that lawsuit. 

The manner in which the Trump administration will implement the CTA remains unclear. In response to questions regarding the CTA during the Senate confirmation process, Treasury Secretary nominee Scott Bessent acknowledged that BOI can be a valuable tool to assist law enforcement efforts but underscored that efforts to combat illicit finance should not create "unnecessary regulatory requirements that are inconsistent with U.S. law and harmful to law-abiding U.S. individuals and businesses." He further committed to "reviewing the regulatory implementation of the CTA to ensure that Treasury meets the law's objective of combating illicit finance without unduly burdening small businesses as Congress directed." 

A brief history of the CTA and how we got here can be found below and in our prior alerts. If your company needs assistance analyzing its obligations under the CTA, our team is ready and able to assist. 

How We Got Here

The CTA is an anti-money laundering (AML) law passed in 2021 that, in relevant part, requires non-exempt companies to file BOI with FinCEN. The government estimates that more than 32 million existing companies and five million new companies each year are covered by the CTA. The deadline for most companies to file their BOI was originally January 1, 2025.

FinCEN issued implementing regulations in 2022, but the law immediately faced legal challenges across the country. Federal district courts in Virginia and Oregon found the law likely constitutional, but federal district courts in Alabama and Texas found the law to be outside Congress's enumerated powers. While the Alabama court enjoined the CTA only for the plaintiffs in that matter, the Texas court issued a nationwide injunction on December 3, 2024, enjoining the reporting requirements for all covered entities less than a month before the deadline. Texas Top Cop Shop, Inc. v. McHenry, No. 4:24-CV-478, 2024 WL 5049220 (E.D. Tex. Dec. 5, 2024). The government filed a motion to stay the injunction pending appeal (which the Texas court denied), appealed to the Fifth Circuit, and asked the Supreme Court to stay the injunction. 

Initially, a Fifth Circuit emergency motions panel stayed the injunction. On December 23, 2024, the panel wrote that the government "made a strong showing that it is likely to succeed on the merits in defending CTA's constitutionality." Texas Top Cop Shop, Inc. v. McHenry, No. 24-40792, 2024 WL 5203138 (5th Cir. Dec. 23, 2024). With that, the reporting deadline was reinstated and FinCEN extended the deadline to January 13, 2025, giving companies additional time to file to account for the temporary injunction. 

Only three days later, however, the CTA pendulum swung back once again. On December 26, 2024, the Fifth Circuit merits panel vacated the motions panel's stay, reimposing the injunction on the CTA and its reporting deadline. The panel agreed to hear an expedited appeal, but in the meantime the CTA would remain enjoined "to preserve the constitutional status quo." Under the Fifth Circuit's schedule for expedited review, briefs and replies are due in February and oral arguments are expected in late March. 

On December 31, 2024, the government asked the Supreme Court to stay the district court's nationwide injunction. The request argued that the Supreme Court traditionally gives a presumption for allowing challenged laws to remain in effect until the courts determine their constitutionality. Furthermore, the government argued that the CTA is well within Congress's power to legislate, particularly because the law's regulation of the economic activity of anonymous ownership of business falls within the ambit of the Commerce Clause. The government also asserted that the equities favor a stay of the injunction because the law is important to protect national security and prevent financial crimes. In addition, FinCEN expended major resources to implement the CTA and educate the public about the requirements: the compliance costs put forward by the plaintiffs do not compare to the foreign policy and security costs put forward by the government. 

The stay request was referred to Justice Alito, who asked the Texas Top Cop Shop plaintiffs to respond to the government's application for the stay. On January 10, 2025, the plaintiff-respondents argued that the CTA fell well outside the scope of Commerce Clause power because the law attempted to regulate the mere existence of an entity and not interstate commerce. Furthermore, the respondents argued that delay would not threaten important government interests because FinCEN took three years after the law's passage to require filing. The respondents argued that a nationwide injunction is authorized by the Administrative Procedures Act (APA) section 705 and is neither novel nor concerning, and lifting the injunction would cause irreparable harm to the plaintiffs in the form of compliance costs, deprivation of constitutional rights, and mootness of their legal claims. The government replied a few days later. 

On January 23, 2025, the Court issued a two-page order granting the requested stay and lifting the nationwide injunction. Justice Alito provided no reasoning in the order. Justice Gorsuch concurred, saying that he would go a step further and resolve the question of whether a district court may issue universal injunctive relief. Justice Jackson dissented, saying that "[h]owever likely the Government success on the merits may be," there was insufficient exigency given the Fifth Circuit's expedited briefing and the multi-year delay in implementing the law. 

For more information, please contact:

Ann Sultan, asultan@milchev.com, 202-626-1474

Ian A. Herbert, iherbert@milchev.com, 202-626-1496

Leah Moushey, lmoushey@milchev.com, 202-626-5896

Peter Kentz, pkentz@milchev.com, 202-626-5891

The information contained in this communication is not intended as legal advice or as an opinion on specific facts. This information is not intended to create, and receipt of it does not constitute, a lawyer-client relationship. For more information, please contact one of the senders or your existing Miller & Chevalier lawyer contact. The invitation to contact the firm and its lawyers is not to be construed as a solicitation for legal work. Any new lawyer-client relationship will be confirmed in writing.

This, and related communications, are protected by copyright laws and treaties. You may make a single copy for personal use. You may make copies for others, but not for commercial purposes. If you give a copy to anyone else, it must be in its original, unmodified form, and must include all attributions of authorship, copyright notices, and republication notices. Except as described above, it is unlawful to copy, republish, redistribute, and/or alter this presentation without prior written consent of the copyright holder.