CSG Law Alert: Nationwide Preliminary Injunction of the Corporate Transparency Act
On December 3, 2024, a federal district court in Texas issued a nationwide preliminary injunction temporarily halting the enforcement of the Corporate Transparency Act (“CTA”). In Texas Top Cop Shop v. Garland et al., Case No. 4:24-cv-00478 (E.D. Tex.) the plaintiffs raised numerous constitutional arguments against the CTA, including concerns about privacy given the personal information about beneficial owners required to be reported under the CTA. The Court found that the CTA is “likely unconstitutional” and questioned the disproportionate financial and logistical burdens placed on small businesses in order to maintain compliance.
In light of the upcoming January 1, 2025 filing deadline for beneficial ownership information reporting, the Court’s order granting the preliminary injunction provides that reporting companies do not need to comply with the January 1, 2025 deadline, pending further order of the Court. It is important to note that the preliminary injunction only temporarily suspends reporting obligations under the CTA at this time, but enforcement could resume if the Court’s order is overturned on appeal.
What does this mean for Reporting Companies?
- For reporting companies that have already filed beneficial ownership information reports (“BOI Reports”) with the Financial Crimes Enforcement Network (“FinCEN”), no immediate action is required at this time.
- For reporting companies that have not yet filed a BOI Report, in light of the Court’s order, there is currently no requirement to comply with the CTA’s upcoming January 1, 2025 deadline for filing BOI Reports.
However, if the injunction is lifted or otherwise reversed on appeal, reporting companies may need to act promptly to comply with the CTA. Therefore, it is important that reporting companies closely monitor legal developments and proactively prepare for compliance should this ruling be overturned.
CSG Law will continue to monitor the status of this case, as well as any subsequent legal and administrative developments.
If you have any questions, please contact your CSG Law attorney or the authors of this alert.