As of December 31, 2024, FinCEN has not filed any appeal to the Supreme Court regarding the Fifth Circuit’s Order pushing out resolution of the BOIR compliance question well into 2025. FinCEN has avenues for appeal that could enforce this Congressional mandate. See 28 U.S. Code § 2101(e) (“An application to the Supreme Court for a writ of certiorari to review a case before judgment has been rendered in the court of appeals may be made at any time before judgment.”). There is an appellate case further along than the one in the Fifth Circuit and FinCEN may be waiting to see what happens in that case given the Supreme Court is more likely to take on this case if there is a direct conflict between Circuits.
On December 27, 2024, Appellee in the Eleventh Circuit filed their supplemental filing regarding the Fifth Circuit’s recent about-face – giving it an opportunity to explain away the earlier Fifth Circuit decision that ensured BOIR compliance was back on track. Appellee in the Eleventh Circuit took issue with the lifting of the East Texas District Court injunction because
the [Fifth Circuit] motions panel relied on the proposition that the Commerce Clause allows regulation not of commercial activity itself, but of entities that, as a class, have the “ability and propensity” to engage in commercial activity. Ord. 4. But as the plaintiffs here have noted, that theory is foreclosed by NFIB v. Sebelius, 567 U.S. 519 (2012). See Br. 28-29. Commerce Clause precedents uphold congressional enactments when they regulate actual economic activity, not the “ability and propensity” for it. See Gonzales v. Raich, 545 U.S. 1, 7 (2005) (cannabis “cultivat[ion]”); Katzenbach v. McClung, 379 U.S. 294, 297 (1964) (restaurants’ “refus[al] to serve”); Wickard v. Filburn, 317 U.S. 111, 127 (1942) (wheat “production”).
The Fifth Circuit motions panel’s other merits determination – that the standard governing “facial challenge[s]” was unsatisfied – was equally wrong. Ord. 5. As the plaintiffs’ briefing in this Court explains, no application of the CTA is within Congress’s Commerce power because the event that triggers regulation of every entity under the statute – corporate formation – is not commercial. See Br. 26-27; Suppl. Br. 5.
It is difficult to see how “corporate formation” is not considered a “commercial endeavor” or that NFIB v. Sebelius, 567 U.S. 519 (2012) forecloses a theory that posits commercial activity can encompass the “ability and propensity” to engage in commercial activity when the phrase “ability and propensity” is not even found in NFIB v. Sebelius, 567 U.S. 519 (2012).
While it is impossible to predict how the Supreme Court will rule – especially given its recent pronouncements tending to curb governmental overreach, the following editorial from an attorney at Adkisson Pitet LLP does a great job of describing the unfortunate situation faced by millions of companies due to the December 26, 2024 Order entered by the Fifth Circuit vacating its own Order of only a few days earlier.
In light of the long-standing U.S. Supreme Court precedence recited above by the motions panel, the merits panel should simply (and quickly) have held that the reporting requirements of the CTA are within the scope of Congress’ powers under the Commerce Clause and reversed the decision of the District Court. Those challenging the CTA could then have taken an emergency appeal to the U.S. Supreme Court allowing the U.S. Supreme Court to itself determine whether the gravity of the challenge to the CTA warranted the imposition of a preliminary injunction to stay enforcement of the BOI reporting requirement. That is how all of this should have gone down.
My personal opinion of all this is that it represents an shirking of responsibility by the merits panel to not resolve this issue one way or another within a few days, even though the delay will create a great hardship upon tens of millions of Americans who may suddenly find that they do have to make their BOI filings and then have what will probably only be a short period of time to do so. This delay will also result in those who have already made their BOI reports unjustifiably questioning the competency of their professional advisers who told them to go ahead and file and get it out of the way. It is a bad look all around — and all for a legal issue that, if it appeared as a hypothetical on the bar examination, could be fully resolved by most applicants within five minutes.
Instead, the Fifth Circuit has created a big mess for literally tens of millions of Americans who are confused about these on again, off again antics. For its part, FinCEN has tried to help (before this last Fifth Circuit order) by extending the BOI reporting deadline to Jan. 13, 2025. Even this extended deadline, however, has itself been rendered a nullity by the Fifth Circuit. As mentioned above, as we sit here today any compliance with the BOI reporting requirement is strictly voluntary.
There is something else to mention here, which is that the District Court should not have entered the injunction in the first place with the reporting deadline so near. Injunctions are equitable in nature, and equity does not favor those who have slept on their rights. National preliminary injunctions that are entered in the 11th hour before legislation goes into effect are particularly disfavored. The Texas litigants who are challenging the CTA knew about its existence years ago when it was passed and the pending Jan. 1, 2025 deadline was set in September 2022. These litigants did not, however, file their lawsuit until the end of May this year and should have not have been rewarded for their own intentional delay in bringing their challenges.
