On December 3, 2024, the U.S. District Court for the Eastern District of Texas issued a nationwide preliminary injunction against enforcing the Corporate Transparency Act (CTA) in Texas Top Cop Shop, Inc. et al. v. Garland. This ruling temporarily halts compliance requirements for reporting companies, including filing beneficial ownership information (BOI) reports with the Financial Crimes Enforcement Network (FinCEN).
Background on the CTA and Deadlines
The CTA, effective January 1, 2024, mandates most U.S. and foreign entities registered in the U.S. to report detailed information about their entities and beneficial owners. Original deadlines under the CTA included:
- For entities formed before January 1, 2024: BOI reports were due by January 1, 2025.
- For entities formed on or after January 1, 2024:
- Reports were due within 90 days of formation during 2024.
- Reports were due within 30 days of formation starting January 1, 2025.
Impact of the Injunction on Deadlines
The court’s ruling halts all enforcement of these deadlines. Companies are currently not required to comply with the CTA or submit BOI reports. This stay applies to both upcoming deadlines for pre-2024 entities and formation-based deadlines for entities formed in 2024 and beyond.
Legal Rationale
The court found the CTA unconstitutional, ruling that it exceeds the federal government’s authority under the Commerce Clause and the Necessary and Proper Clause of the U.S. Constitution. The injunction also extends nationwide, citing the broad membership of the plaintiff, the National Federation of Independent Business (NFIB).
Next Steps for Businesses
This preliminary injunction may face appeal. If overturned, companies will need to meet the original CTA deadlines. Businesses, especially those with complex ownership structures, should prepare for potential compliance requirements by:
- Staying Informed: Monitor ongoing litigation and government actions.
- Preparing for BOI Filing: Maintain readiness to submit reports quickly if the injunction is lifted.
- Seeking Legal Guidance: Consult attorneys to ensure compliance strategies are in place.
Conclusion
While the court’s decision currently halts CTA enforcement, its future remains uncertain. Companies should remain cautious and informed, given the possibility of further legal developments.
Filippov Law Group, PLLC continues to monitor these updates. If you have questions about the CTA or its implications, please contact our office for personalized guidance.