What a mess a Texas Federal Court and now FinCEN are making regarding the Corporate Transparency Act (CTA). Days ago, District Judge Amos L. Mazzant of the Eastern District of Texas issued a preliminary injunction ordering that the entire CTA is enjoined nationwide and that the US government in enjoined from enforcing the BOI Reporting Rule (the final rule implementing the CTA and providing definitions and guidance for the statute) and the Jan. 1, 2025, compliance deadline.

The US government filed a notice of appeal today indicating that it is not accepting the District Judge’s injunction. We expect the government to act quickly, but so far, no appeal brief or motion to the circuit court that overseas the Eastern District of Texas has been filed.

FinCEN sat silent since the injunction and just placed information that the injunction is in place and that reporting companies can comply with the CTA if they want to, but are not presently required to do so and will not be penalized as long as the injunction is in place if they don’t comply. See below.

The trouble with not complying is, what happens when the injunction is lifted on appeal and compliance is required. Will FinCEN give an extension to comply before penalties kick in? It seems reasonable, but not guaranteed based on FinCEN’s message that reporting companies can continue to comply if they want to. It would have been more reasonable and manageable for FinCEN to extend the January 1, 2025 reporting requirement to a date that is a set time period from the day that the injunction is lifted or a later date like June 1, 2025, whichever earlier. That’s not what FinCEN has done and by not doing this, it has created a lot of confusion and anxiety for entities that are required to comply.

We will keep you posted of developments. For now, although the nationwide preliminary injunction relieves the immediate obligation – i.e., right now – to file beneficial ownership reports with FinCEN, it would be prudent for non-exempt reporting entities that haven’t yet filed to continue to prepare for their report filing by continuing to gather all information and documents that the CTA requires. If it turns out that compliance is not required, then they don’t have to submit their report to FinCEN, but if they do and FinCEN does not give a reasonable time thereafter for compliance, then reporting companies don’t have to scramble at the last minute to comply before the hefty $591 a day fines kick in.

Here is the FinCEN notification on its website.

Here is the notice of appeal.