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Home | BakerHostetler

Nationwide CTA Injunction Is Back in Effect. What Happens Now?

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Fifth Circuit Strikes Down CTA Injunction, FinCEN Extends Deadline to Jan. 13, 2025

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On Dec. 26, 2024, the merits panel of the Fifth Circuit Court of Appeals <a href="https://admin.bakerlaw.com/wp-content/uploads/2024/12/1.-Fifth-Circuit-Order-Vacating-Emergency-Stay.pdf" target="_blank" rel="noreferrer noopener">vacated the emergency stay</a> granted by its motions panel on Dec. 23, which had lifted the nationwide injunction against the Corporate Transparency Act (CTA).

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As a result, the nationwide preliminary injunction granted by a federal district court in Texas on Dec. 3, 2024, is back in effect, meaning that no reporting company currently has any reporting obligations under the CTA—unless and until the injunction is stayed, narrowed or overturned on further appeal.

At this time, the U.S. government may seek an emergency stay of the injunction from the Supreme Court of the United States. If the emergency stay is granted, the CTA would again be back in effect. If denied (or if the government does not seek emergency relief), the Fifth Circuit Court of Appeals will hear and decide on the merits of the government’s original appeal, which is a process that would take months to complete.

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In yet another twist, the CTA is again currently enjoined (for now). On Dec. 26, in a highly unusual chain of events, the merits panel of the Fifth Circuit Court of Appeals vacated the emergency stay granted by the motions panel on Dec. 23, <a href="https://www.bakerlaw.com/insights/fifth-circuit-strikes-down-cta-injunction-fincen-extends-deadline-to-jan-13-2025/" target="_blank" rel="noreferrer noopener">which had lifted a nationwide injunction</a> against the CTA originally issued by a federal district court in Texas on Dec. 3.

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In its brief, three-paragraph order, the merits panel stated that it was vacating the stay “in order to preserve the constitutional status quo while the merits panel considers the parties’ weighty substantive arguments.”

What does this new order stay mean for reporting companies?

The <a href="https://www.bakerlaw.com/insights/federal-district-court-issues-nationwide-cta-injunction/" target="_blank" rel="noreferrer noopener">nationwide preliminary injunction</a> granted by the district court is back in effect, meaning that no reporting company (whether preexisting or newly formed) currently has any reporting obligations under the CTA—unless and until the injunction is stayed, narrowed or overturned on further appeal.

Can the government seek emergency relief?

Yes. At this time, the government’s most likely path to do so would be to seek an emergency stay from the Supreme Court. The government could also file an emergency petition with the Fifth Circuit for an en banc rehearing of the merit panel’s decision, but observers consider this option to be less likely.

If the government pursues emergency relief, it will likely file an application within the next few days. In either case, we would expect the reviewing court to issue a decision within the next few weeks, possibly before the new Jan. 13, 2025 deadline.

What if the government does not seek emergency relief or that relief is ultimately denied?

Then we are back to the Fifth Circuit Court of Appeals, where the merits panel will hear and decide on the merits of the government’s original appeal (i.e., whether the district court was right to grant the preliminary injunction). During this process, the nationwide injunction will remain in effect, unless and until the government wins its appeal on the merits.

While the appeal has been expedited, this process would still take months to complete.On Dec. 27, the Fifth Circuit published its schedule for this case—with <a href="https://admin.bakerlaw.com/wp-content/uploads/2024/12/2.-Fifth-Circuit-Briefing-Schedule.pdf" target="_blank" rel="noreferrer noopener">briefing scheduled</a> to conclude Feb. 28, 2025, and <a href="https://admin.bakerlaw.com/wp-content/uploads/2024/12/3.-Fifth-Circuit-Oral-Arguments-Schedule.pdf" target="_blank" rel="noreferrer noopener">oral arguments scheduled</a> to take place on Mar. 25, 2025. Thereafter, a decision would be expected in April or possibly May.

What if the government again obtains emergency relief or ultimately wins on appeal?

If that happens, then the CTA will again be in effect. But the good news is that we now have <a href="https://www.bakerlaw.com/insights/fifth-circuit-strikes-down-cta-injunction-fincen-extends-deadline-to-jan-13-2025/" target="_blank" rel="noreferrer noopener">precedent from the Financial Crimes Enforcement Network (FinCEN) that it will extend the filing deadlines</a> for new and preexisting companies to account for periods in which the preliminary injunction was in force. While there is no guarantee it will do so again, we would expect FinCEN to similarly extend the filing deadlines to give reporting companies additional time to comply with their reporting obligations in the event the CTA becomes effective once again.

We will continue to provide updates regarding further material developments as they arise.<a id="_msocom_1"></a>

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