On December 23, 2024, the Fifth Circuit Court of Appeals of the United States lifted the nationwide preliminary injunction issued by the Texas District Court in the case of Texas Top Cop Shop, Inc., et al. v. Merrick Garland, et al.

This case arose from the enforcement of the reporting requirements under the Corporate Transparency Act (CTA), which mandates that companies created in the United States and foreign companies conducting business in the U.S. report their beneficial owners to the Financial Crimes Enforcement Network (FinCEN). The CTA aims to combat financial crimes and illicit activities by enhancing ownership transparency.

Certain business owners argued that the CTA and its reporting requirements were unconstitutional in the case, claiming that Congress lacked the authority to enact the law. Consequently, they filed the lawsuit to challenge its constitutionality.

While the case was pending, the plaintiffs sought a preliminary injunction, successfully meeting the legal requirements for its issuance. As a result, the Texas District Court issued a nationwide preliminary injunction, temporarily halting the enforcement of the CTA’s reporting requirements.

The federal government, dissatisfied with this ruling, filed an appeal and an emergency motion to stay the nationwide preliminary injunction while the appeal was under consideration.

On December 23, 2024, a three-judge panel of the Fifth Circuit Court of Appeals, which has jurisdiction over the matter, granted a temporary stay of the Texas District Court’s injunction. This decision rendered the CTA’s reporting requirements enforceable. The appellate court ruled that the CTA was within Congress’s authority under the Commerce Clause and that allowing an injunction against the statute would cause irreparable harm to the government.

Following this ruling, businesses across the United States are now required to comply with the Beneficial Ownership Information Reporting (BOIR) requirements under the CTA. The decision reinstates the reporting mandate, clarifies compliance deadlines, and emphasizes the urgency for companies to meet their obligations.