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Warner Norcross + Judd LLP is a corporate law firm with over 230 attorneys serving clients in nine offices throughout Michigan. Among the largest law firms in Michigan, Warner works in virtually all areas of business law.

Michigan Law Firm - Warner Norcross + Judd LLP

On Dec. 23, 2024, the U.S. Court of Appeals for the Fifth Circuit granted the government’s motion to stay an injunction previously issued by a federal district court in Texas in&nbsp;Texas Top Cop Shop, Inc. v. Garland. As a result of this order,&nbsp;filing obligations and enforcement of the Corporate Transparency Act (CTA) are again in effect.

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Effective immediately, CTA filing obligations and enforcement are back on.&nbsp;It’s time to file. Companies should not expect further relief from reporting requirements before the Jan. 1 reporting deadline applicable to most reporting companies.

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Under the CTA, all reporting companies in existence before Jan. 1, 2024, must file their beneficial ownership reports no later than Jan. 1, 2025. Companies formed during 2024 must file their initial beneficial ownership reports no later than 90 days after formation. Companies formed during 2025 must file their initial beneficial ownership report within 30 days after formation.

We encourage clients to finish assembling all information needed to submit beneficial ownership information reports and to promptly submit their reports online. For more details on the required information and process for reporting, please see our prior&nbsp;<a href="https://www.wnj.com/updates/are-you-ready-to-submit-your-corporate-transparency-act-reports-by-year-end/">eAlert</a>.

The Fifth Circuit’s order issued a temporary stay of the prior nationwide injunction that suspended CTA reporting obligations and enforcement. The prior injunction is set aside while the Fifth Circuit considers the government’s appeal of the lower court’s decision.

What does this mean for the CTA?

The Fifth Circuit concluded that the government has a substantial likelihood of success on the legal merits of its appeal. This determination suggests that the appellate court will ultimately find the CTA is constitutional and enforceable.

Several other challenges to the CTA remain ongoing. This spring, a federal district court in Alabama found that the CTA was unconstitutional in a case presently on appeal to the Eleventh Circuit Court of Appeals. The Eleventh Circuit or another court may take action that again shifts the CTA landscape and could suspend filing obligations once more. In addition, the plaintiffs in the&nbsp;Texas Top Cop Shop&nbsp;case could appeal the Fifth Circuit’s order to the United States Supreme Court. Unless either of those events occurs, however, the CTA is back on track.

The CTA provides both civil and criminal penalties for non-compliance. Penalties that can be assessed against entities and any individuals who willfully fail to comply with the CTA are severe.

File your report as soon as possible.&nbsp;While we cannot predict the next few days with certainty, we believe the odds of further relief before the Jan. 1, 2025, reporting deadline are slim.

As many as 20 million entities are facing a Jan. 1, 2025, deadline and have not yet filed their reports. The United States Financial Crimes Enforcement Network’s (FinCEN) online reporting system is expected to see a significant increase in traffic as year-end approaches. Clients who wait until the last minute on Dec. 31 or Jan. 1 may risk system crashes that could make it more challenging to submit BOI reports on time.

Beware of scams related to filings.

CTA beneficial ownership information reports are submitted via FinCEN’s&nbsp;<a href="https://www.fincen.gov/boi">website</a>, and FinCEN does not charge a fee for filing. FinCEN has repeatedly warned of bad actors using the CTA as a means to gather sensitive information and/or charge exorbitant filing fees (with or without even filing a report as promised). Exercise caution to ensure that anyone you enlist to assist with CTA filings is a trusted, legitimate advisor.

Warner’s CTA task force is continuously monitoring developments and will provide updates as the litigation continues. If you have questions about how the CTA impacts your company, reach out to Corinne Curtis, Loren Andrulis, Charlie Quigg, Phil Haywood or your Warner attorney.

CTA Injunction Stayed: Most Companies Must File Beneficial Ownership Information Reports by Jan. 1, 2025

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