
FinCEN Suspends CTA Enforcement Despite Supreme Court Ruling
On January 23, 2025, the United States Supreme Court stayed the injunction granted by the United States District Court for the Eastern District of Texas in Texas Top Cop Shop v. Garland, which enjoined the Financial Crimes Enforcement Network (FinCEN) from enforcing the Corporate Transparency Act (CTA) nationwide. However, FinCEN has indicated that it is still subject to a nationwide ban on the enforcement of the CTA under an order in a separate case in the United States District Court for the Eastern District of Texas challenging the enforcement of the CTA, Smith v. The United States Department of Treasury.
As a result, FinCEN noted in a statement on its website on January 24, 2025 that reporting companies are still not subject to liability if they do not file a beneficial ownership information report with FinCEN while the Smith order remains in effect.
As described in our earlier advisory, the United States District Court for the Eastern District of Texas in Texas Top Cop Shop v. Garland issued a preliminary injunction enjoining FinCEN from enforcing the Corporate Transparency Act nationwide. The government appealed the district court’s decision to the Fifth Circuit and filed an emergency motion for a stay of the injunction pending appeal. While the Fifth Circuit initially granted the government’s emergency motion to stay the injunction, three days later the Fifth Circuit vacated that stay, leaving the district court’s injunction in place.
The government then applied to the Supreme Court for a stay of the injunction, which it granted. The Supreme Court’s stay is in effect until the disposition of the government’s Fifth Circuit appeal and possibly later if a writ of certiorari is filed with the Supreme Court after the disposition of that appeal.
However, while the order in the separate Smith decision expressly enjoined FinCEN from enforcing the CTA against the two plaintiffs in that case and their entities, FinCEN has taken the position, presumably based upon other language in the order, that it imposes a nationwide ban on FinCEN’s enforcement of the CTA.
In terms of future FinCEN action, if it becomes able to enforce the CTA, the nominee for Secretary of the Treasury, Scott Bessent, in response to questions raised during the Senate confirmation process, stated that he was “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.”
We recommend that reporting companies continue to gather the information needed to file beneficial ownership information reports with FinCEN if and when they once again become obligated to do so.