The defendants, the United States Department of the Treasury, are requesting a stay of the court’s order granting a preliminary injunction against the enforcement of the Corporate Transparency Act (CTA). The defendants have filed a motion for a stay pending appeal to the Fifth Circuit, arguing that the stay is warranted based on the Supreme Court’s decision to stay a similar injunction in a parallel case, McHenry v. Texas Top Cop Shop. But the agency is also indicating that changes may come to the CTA reporting requirements before reports would become due if the court grants this motion.

Here is a breakdown of the government’s motion:

Motion for Stay Pending Appeal:

• The defendants have appealed the court’s grant of a preliminary injunction and stay under § 705 of the Administrative Procedure Act (APA). They are requesting the court to stay its order pending the Fifth Circuit’s decision on the appeal.
• The defendants cite McHenry v. Texas Top Cop Shop (Texas Top Cop Shop IV), No. 24A653, 604 U.S. ----, 2025 WL 272062, at *1 (U.S. Jan. 23, 2025), in which the Supreme Court stayed a preliminary injunction and a § 705 stay in a similar case, arguing that the same result is warranted here.

Background of the Corporate Transparency Act (CTA):

• The CTA was enacted on January 1, 2021, and requires certain companies to disclose ownership information to the Financial Crimes Enforcement Network (FinCEN).
• Congress found that collecting beneficial ownership information is necessary to protect interstate and foreign commerce and to counter money laundering, the financing of terrorism, and other illicit activity.
• The CTA imposes disclosure requirements on "reporting companies," which generally include corporations, limited liability companies, or similar entities created by filing a document with a secretary of state or formed under foreign law and registered to do business in the U.S..
• The CTA excludes certain businesses and allows the government to exempt other entities if requiring beneficial ownership information would not serve the public interest or be highly useful in preventing crime.
• FinCEN issued a final rule implementing the CTA in September 2022, which established compliance deadlines, with businesses formed before 2024 required to comply by January 1, 2025, and those created later having deadlines of 90 days or 30 days depending on when they were created.

Actions if Stay is Granted and Impact on Reporting Entities:

• If the stay is granted, FinCEN intends to extend the CTA compliance deadline for thirty days.
• During this 30-day period, FinCEN plans to assess whether to modify the CTA’s reporting requirements to alleviate the burden on low-risk entities while prioritizing enforcement against the most significant threats to national security. This may involve amending the Final Rule.
• The government argues that the stay would facilitate this process and allow Treasury to implement and modify the Final Rule as warranted.
• The government also contends that any burden on those required to comply with the CTA is outweighed by the harm of blocking a validly enacted Act of Congress.

Arguments for the Stay:

• The government argues there is a strong presumption that Acts of Congress should remain in effect pending a final decision on the merits.
• The Supreme Court’s stay in Texas Top Cop Shop demonstrates that the government has a likelihood of success on the merits and that the equities and public interest support implementing the Final Rule.
• The government argues that the balance of harms and equities favor the government, citing the irreparable injury it suffers when a court enjoins the government from effectuating statutes.
• The government also contends that Congress acted within its enumerated powers when enacting the CTA, including the Commerce Clause and the Necessary and Proper Clause.

Conclusion:

The defendants are asking the court to stay its order granting preliminary relief, arguing that a stay is necessary and consistent with the Supreme Court’s decision in Texas Top Cop Shop. If granted, FinCEN plans to extend the compliance deadline for 30 days while it assesses potential modifications to the reporting requirements. At a minimum, the defendants ask the court to stay the nationwide § 705 stay and allow the government to act freely with respect to all but the named plaintiffs.

Prepared with assistance from NotebookLM.

The motion can be read at https://storage.courtlistener.com/recap/gov.uscourts.txed.232897/gov.uscourts.txed.232897.33.0.pdf