The long and winding road of the Corporate Transparency Act (CTA) litigation (as discussed in our most recent CTA client alert) has taken another turn, and this time companies are driving blind. On New Year’s Eve, the U.S. Department of Justice (DOJ) asked the U.S. Supreme Court to lift the injunction imposed by a Texas court and let the law go into effect while the legal contest over the constitutionality of the law is pending. Yesterday, the U.S. Supreme Court resoundingly agreed with the DOJ. In an 8-1 ruling, the nation’s highest Court lifted the stay on enforcement of the statute. One might assume that the Supreme Court ruling ended the injunction issue, but a separate order issued by a different federal judge in Texas blocking enforcement of the statute nationwide remains in place.
As a result, the U.S. Financial Crimes Enforcement Network (FinCEN) issued a statement today confirming that “reporting companies are not currently required to file beneficial ownership information with FinCEN despite the Supreme Court’s action.”
Given the Supreme Court ruling, we would ordinarily expect that the DOJ would move swiftly to have this second nationwide injunction lifted, but it is unclear what position the new Trump administration will take. We believe it likely the DOJ would be successful in having the injunction revoked if it seeks to do so, but even if the injunction is lifted, what would happen next?
If this last injunction is lifted, FinCEN could issue a new filing deadline, but FinCEN is a bureau within the United States Department of the Treasury. Like the DOJ, the Treasury Department is part of the executive branch, which is now headed by President Trump. FinCEN could act on its own to set a new deadline or follow the dictates of the acting Secretary of the Treasury, David Lebryk – or the White House could weigh in.
The road ahead remains uncertain on several fronts. The courts, FinCEN, the Treasury Department, DOJ, and the White House all could make decisions that determine when or if the CTA comes into effect. We will continue to promptly provide updates on future developments.