Honestly, I don’t think I’ve ever been so hesitant to deliver good news. The Corporate Transparency Act injunction has been reinstated. What this means is that you DO NOT have to comply at this time.
While this is certainly welcome news, the on-again, off- again nature of this law has put on full display how little the federal government understands (or cares) about the difficulty of running small businesses. Clearly there is merit to the constitutionality challenge against this law. There is no harm in letting this injunction stand until the issue is fully litigated.
I know that you are busy and I would not normally bother you so much with all these emails. But in this case, the CTA filing deadline is close and the criminal and financial penalties for noncompliance are obnoxiously high. This is information you really do need to know.
As always, we have a resource page that we are working to keep up to date with the latest developments.
Here’s the history so far:
- Background: Many lawsuits were filed challenging the constitutionality of Corporate Transparency Act (CTA) and its Reporting Rule, which require certain disclosures (from nearly all small businesses) to a law enforcement agency.
- Initial Ruling: On December 3, 2024, a district court (lower court) issued an injunction. This means the court temporarily blocked the government from enforcing the CTA and the Reporting Rule while the case is being decided.
- Government’s Response: The government asked the district court to “stay” (pause) the injunction, which would allow the law to remain enforceable during the legal process. The district court denied this request.
- Appeal and Emergency Motion: The government appealed to a higher court (the Fifth Circuit) and asked for an emergency stay of the injunction. On December 23, 2024, a panel of judges at the Fifth Circuit temporarily granted the stay, allowing the government to enforce the law while the appeal continued. The appeal process was also expedited, meaning it will be handled more quickly than usual.
- Revised Decision: A new panel of judges (the “merits panel”) reviewed the situation and decided to vacate (cancel) the earlier decision that allowed the law to be enforced. This restores the district court’s injunction, meaning the government is once again blocked from enforcing the CTA and Reporting Rule for now.
- Next Steps: The case is still moving forward on an expedited timeline, and the court will soon issue a schedule for the main arguments about whether the law is constitutional.
Key Takeaway:
The government cannot enforce the Corporate Transparency Act or the Reporting Rule for now, as the injunction blocking it is back in place. However, the case is moving quickly toward a final decision and this will not be the final say.
By Brian Calley, SBAM President & CEO