What Katy Perry can teach us about the Corporate Transparency Act
Since December 3, 2024, the Corporate Transparency Act (the “CTA”) has been central to a series of complicated legal changes that have greatly affected how the CTA is enforced and followed. The most contentious aspect has been the requirements for reporting the beneficial owners of U.S. entities and non-U.S. entities registered to do business in the U.S.
The legal challenges have led to considerable confusion among those affected by how these reporting rules will be enforced. To clarify this confusion, consider the following lyrics from Katy Perry’s song “Hot N Cold”:
“You’re yes then you’re no”
In 2021, Congress adopted the CTA, but a district court in Texas issued a nationwide injunction suspending the enforcement of the CTA on December 3, 2024, less than one month before the crucial January 1, 2025, reporting deadline.
“You don't really want to stay, no”
On December 23, 2024, the U.S. Court of Appeals for the Fifth Circuit granted a stay of the injunction, reinstating the filing requirement under the CTA. However, three days later, on December 26, 2024, a different panel of the Fifth Circuit vacated the stay, thereby reinstating the injunction.
“Stuck on a roller coaster; can't get off this ride”
On December 31, 2024, in another attempt to enforce the CTA, the federal government has filed an application with the Supreme Court of the United States requesting a stay of the injunction.
“I should know that you're not gonna change”?
As of today, both parties have submitted their briefs to the Supreme Court, and we expect that the Court will issue a decision within the next two weeks.
Should enforcement of the CTA resume swiftly following the Court's decision, reporting companies may find themselves with very limited time to adjust and meet the compliance deadlines. Failing to comply with the CTA can lead to severe consequences, such as fines and potentially criminal penalties.
Thus, I should hope that the injunction is not gonna change.
"Texas Top Cop Shop, Inc. is only one of several cases that have challenged the Corporate Transparency Act (CTA) pending before courts around the country.”
