5th Circuit Sets Aside Nationwide CTA Injunction on December 23, 2024: Complete your Corporate Transparency Act filings before January 1, 2025!

5th Circuit Sets Aside Nationwide CTA Injunction on December 23, 2024: Complete your Corporate Transparency Act filings before January 1, 2025!

On December 3, 2024, a federal court in Texas issued a nationwide preliminary injunction in Texas Top Cop Shop, Inc v Garland, No. 4:24-CV-478, 2024 WL 4953814, at *37 (ED Tex, December 3, 2024), temporarily halting the enforcement of the Corporate Transparency Act. Unfortunately for community associations, the Fifth Circuit delivered a lump of coal just two days before the holiday. On December 23, 2024, the Fifth Circuit stayed the ruling of the district court’s injunction pending appeal. Now, community associations must file a Beneficial Ownership Information (“BOI”) report by December 31, 2024. Failure to do so may result in fines of $10,000 or even jail time.

In its order, the Fifth Circuit ruled as follows:

The Corporate Transparency Act (“CTA”) obliges certain nonexempt companies to report the identity of their beneficial owners and applicants for incorporation. 31 U.S.C. § 5336. On December 3, 2024—less than one month before the crucial January 1, 2025 reporting deadline—the district court granted Plaintiffs-Appellees’ (the “Businesses”) motion for a preliminary injunction and entered a nationwide injunction enjoining the CTA and the corresponding Reporting Rule. Id.; 31 C.F.R. § 1010.380. The district court concluded that both are unconstitutional and issued nationwide injunctions against each, despite no party requesting it do so and despite every other court to have considered this issue tailoring relief to the parties before it or denying relief altogether.

The government, Defendants-Appellants, filed an emergency motion with this court seeking a stay. Because the government has met its burden under Nken v. Holder, 556 U.S. 418 (2009), we GRANT its motion for a temporary stay of the district court’s order and injunction pending appeal.

Per the Fifth Circuit’s ruling, the preliminary injunction that was entered on December 3, 2024 is no longer in effect and reporting companies (including community associations) remain obligated to comply with the requirements of the CTA. While the judicial system did not provide relief to community associations, many were hopeful that Congress would provide the necessary relief to community associations.

On Saturday, December 21, 2024, President Biden signed into law H.R. 10545, the “American Relief Act, 2025”, which averted a government shutdown. The initial draft resolution included an amendment to the CTA that would have delayed the filing deadline to January 1, 2026. However, that language was removed from the final resolution. As such, the January 1, 2025 filing deadline remains in effect.

Conclusion

The Fifth Circuit’s ruling on December 23, 2024 is a devastating blow to community associations. The Fifth Circuit not only removed the preliminary injunction that was in effect, Congress failed to include any language in H.R. 10545 that would have delayed enforcement of the CTA until January 1, 2026. Accordingly, community associations must file a BOI report with FinCEN by January 1, 2025 or face penalties such as $10,000 of fines or even jail time. We recommend that community associations contact Hirzel Law, PLC as soon as possible to take the necessary steps to file a BOI report with FinCEN.

 

Jeremy Fernando is an Associate Attorney at Hirzel Law, PLC. Mr. Fernando is licensed to practice law in the State of Illinois. He concentrates his practice on community association law, condominium law, homeowners association law, and real estate law. Mr. Fernando’s legal career includes serving in corporate practice where he represented insurance companies and institutional investors in U.S. and cross-border private placements of securities, including transactions in the Netherlands, England, Ireland, Australia, and Germany. Mr. Fernando earned his Juris Doctor from Marquette University Law School, where he graduated with honors and ranked in the top 15% of his class. He also served as an Associate Editor of the Marquette Law Review. Mr. Fernando is committed to providing effective legal representation to his clients and is passionate about helping communities navigate complex legal challenges. He may be reached at 312-552-7669 or jfernando@hirzellaw.com.