The Corporate Transparency Act: The More Things Change, The More They Stay the Same (January 2025 Update)

Beneficial Ownership Interst Reports & The Status Quo

The quote “the more things change, the more they stay the same” has been attributed to French writer Jean-Baptiste Alphonse Karr. It speaks to how, despite there being many superficial changes in the short term, over the long term, the status quo remains. And, while I’m sure it applied in his day, it remains true now. Specifically, in the context of the Corporate Transparency Act (the “CTA”), and its Beneficial Ownership Interest reporting requirement (the “BOIR”) and its ongoing legal drama.

The Corporate Transparency Act: What It Is & Why People Want to Stop It

To provide a super quick summary of the CTA and legal proceedings so far. In the United States, business entities, like Corporations and Limited Liability Companies (“LLC”) are formed by filing documents with a state government office, usually the state’s department of state. Historically, unless a business operates in certain industries or is of a certain size, it does not need to disclose information about their ownership to the federal government.

To combat money laundering and international crime, Congress passed the CTA in 2021. The CTA achieves this goal by requiring almost all business entities to file a BOIR with the Financial Crimes Enforcement Network (“FinCEN”). A BOIR asks for a bunch of identifying information from anyone who owns or controls more than 25% of a business entity. This combats money laundering and international crime by using sunlight as a disinfectant. The idea being that using a shell company won’t be an attractive option to criminals can’t use it to hide their identity from law enforcement.

This justification for the CTA is greatly at odds with the libertarian bent in American cultural attitudes towards the federal government. So, as you can imagine, the CTA and BOIR resulted in a tremendous number of lawsuits to prevent its enforcement.

Texas Top Cop Shop: Proceedings So Far

One of these lawsuits, named Texas Top Cop Shop, Inc. v. Garland, filed in the United States District Court for the Eastern District of Texas (the “Eastern District of Texas”), a federal trial court, resulted in a nationwide temporary injunction against federal government. Meaning FinCEN was prohibited from enforcing the CTA’s BOIR until the case was resolved.

The federal government filed an appeal of the injunction with the Fifth Circuit Court of Appeals, (the “Fifth Circuit”), the appellate court for the Eastern District of Texas. A panel of Fifth Circuit judges lifted the Eastern District of Texas’ injunction until the federal government’s arguments could be heard on the merits and stated that the next available panel should hear the federal government out. That later panel then re-instated the injunction, meaning that, once again, FinCEN could not enforce the CTA.

The Supreme Court Reverses!

The federal government then appealed the Fifth Circuit’s decision to the Supreme Court of the United States (the “Supreme Court”). On January 23, 2025, in a decision I personally found surprising given the conservative supermajority on the bench, the Supreme Court sided with the federal government and reversed the Fifth Circuit’s re-instatement of the Eastern District of Texas’ injunction. This means that the nationwide injunction granted in Texas Top Cop Shop was no longer effective.

So That's It, Right?

You’re probably thinking this has cleared the way for FinCEN to enforce the BOIR. You’re wondering how long you’ve got until the new deadline kicks in?

Well, believe it or not, nothing has changed.

Despite the injunction being lifted, FinCEN has not released a new deadline.

“Why?” you ask.

The More Things Change, The More They Stay the Same

Well, on January 7, 2025, the Eastern District of Texas granted a motion granting a nationwide injunction prohibiting FinCEN from enforcing the BOIR…

In separate case, called Smith v. United States Department of The Treasury.

So, despite all the back & forth in Texas Top Cop Shop, the status quo remains.

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