The US Supreme Court’s decision to pause a nationwide injunction blocking the Corporate Transparency Act again created uncertainty for US businesses even as the federal government said enforcement of the law remains on hold.
The justices on Thursday granted the Justice Department’s request to stay the injunction—the first to block the CTA nationwide—while litigation over the constitutionality of the law continues. The case will return to the US Court of Appeals for the Fifth Circuit for oral arguments in March.
But the effective date of a key regulation implementing the law remains stayed by another district court in a separate case, Smith v. US Department of Treasury, the Treasury Department’s Financial Crimes Enforcement Network said in an alert Friday.
That regulation would have imposed an initial deadline for about 32 million US business entities to disclose the identities of their beneficial owners—individuals who control the business—to FinCEN.
“I would advise everyone to take a deep breath,” said Seth Ashby, leader of Varnum LLP’s business and corporate practice team.
The Supreme Court’s order “has no immediate effect because the government already is on the record saying they would take steps to provide for an extended compliance deadline,” Ashby said. “But more importantly, they need to do something about the decision in the Smith case.”
In Smith, the US District Court for the Eastern District of Texas issued an injunction blocking the CTA only against the plaintiffs in the case, but paused the reporting deadline nationwide.
The government will likely need to appeal that order before Treasury can practically resume CTA enforcement, Ashby said.
Prepare to File
Entities existing before 2024 originally were instructed to file before 2025, but the government pushed that deadline back to Jan. 13 after courts successively enjoined the law’s enforcement throughout December.
“In light of a recent federal court order, reporting companies are not currently required to file beneficial ownership information with FinCEN and are not subject to liability if they fail to do so while the order remains in force,” the agency said. “However, reporting companies may continue to voluntarily submit beneficial ownership information reports.”
The Justice Department declined to comment on the Supreme Court case.
Earl Melamed, a Chicago-based partner at Neal Gerber Eisenberg LLP, said he’s advising his clients to prepare to file their beneficial ownership reports despite the stay.
FinCEN is likely to give businesses only a few weeks’ notice before implementing a new filing deadline in the event the agency gets the green light to enforce the CTA, he said.
“We anticipate it would be a short extension” of the filing deadline, Melamed said. “If actions do come later, it will really be too little, too late by that point.”
Uncertain Future
President Donald Trump’s stance toward CTA enforcement also remains to be seen, adding an extra element of uncertainty.
“The ball is really in the new administration’s court,” said Caleb Kruckenberg, litigation director for the Center for Individual Rights.
The Supreme Court’s stay is akin to “the court directing the Executive Branch to decide what it wants to do,” he said.
CIR represents Texas Top Cop Shop Inc., the firearms retailer that sued to block the CTA in the case before the Supreme Court.
The CTA’s proponents are primarily congressional Democrats who say the law cracks down on anonymous shell companies involved in illicit financial schemes like terrorist financing. A group of GOP attorneys general supported the Supreme Court keeping in the injunction in place, calling the CTA’s requirements constitutionally suspect and costly to businesses.
Sen.
Despite GOP opposition, CTA proponents say the Trump administration could support the law out of concern for national security and global competition.
“There are dozens of examples of US companies being abused for fentanyl trafficking, human trafficking, sanctions evasion, to undermine our supply chains that feed our defense systems,” said Erica Hanichak, government affairs director of the FACT Coalition, an alliance of organizations that works to “combat the harmful impacts of corrupt financial practices.”
“I think particularly as we look to the national security threats the US faces from China, from Russia, from Iran, making sure that those adversaries can’t find safe haven in the US financial system is as important as ever,” she said.
The case is McHenry v. Texas Top Cop Shop Inc., U.S., No. 24A653, order 1/23/25.
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