An appellate court today ruled in favor of the federal government in reversing a nationwide injunction against the Corporate Transparency Act. The decision means that the CTA’s reporting requirements are now back in full effect, giving the approximately 20 million entities who have not yet submitted their filings just a few days to do so.
The injunction that’s currently in place was ordered by a Texas court which found that the CTA is “likely unconstitutional” and that Congress went beyond its authority in enacting the statute. The government quickly requested that the injunction be stayed pending a final ruling.
In response, S-Corp, in addition to more than a dozen organizations and 25 states, filed amicus briefs urging the Fifth Circuit to keep the injunction in place. Our argument was that doing so would give millions of businesses more time to learn about their new filing obligations while giving the courts time to make a final ruling. As a practical matter, lifting the injunction this close to the filing deadline also presents a logistical nightmare for countless businesses.
That nightmare is about to become a reality. At of the start of December, federal regulators estimated that just a third of the entities required to file under the CTA had done so. Given the massive education gap we know exists, there’s little doubt that most of the remaining 20 million entities will not be in a position to comply with the filing requirements before the end of the year.
This fight is not over. Next step on the advocacy side will be to work with the incoming Trump Administration to delay the filing deadline administratively. This won’t help existing companies which already reported their Beneficial Ownership Information, but it will help new incorporations and those businesses that failed to file.
Over at the courts, we expect the NFIB to appeal the Fifth Circuit Court decision. Word is an expedited appeal hearing on the stay is already in the works, but that hearing is unlikely to take place before the end of the year.
Meanwhile on the merits, today’s court order argues that the government is likely to succeed in its defense of the CTA, but that decision was written by two Democrat judges, so it may not reflect the views of the full Fifth Circuit or the Supreme Court.
Finally, we have yet to hear from the Eleventh Circuit, which is considering the government’s appeal of the North District of Alabama District Court decision that the CTA is unconstitutional. That decision could come down any day now.
So bad news right before Christmas, but lots more to come on the CTA. Looking forward to better results next year.