CTA Compliance Enjoined (For the Moment)

On December 3, 2024, the U.S. District Court for the Eastern District of Texas issued a nationwide preliminary injunction against the enforcement of the Corporate Transparency Act (CTA). In Texas Top Cop Shop v. Garland, Case No, 4:24-cv-00478, U.S, District Court Judge Amos L. Mazzant issued the injunction on constitutional grounds and cited the overall impact of the CTA on small businesses, even going so far as to deem the statute as “quasi-Orwellian.”

The timing of this decision is significant as millions of companies were required to submit their Beneficial Ownership Information Reports (“BOIRs”) on the Financial Crimes Enforcement Network (“FinCEN”) website prior to the January 1, 2025 deadline.

What does this mean?

For the time being:

•  Companies that have not registered with FinCEN and submitted their BOIRs may pause doing so.
• Companies that have already registered with FinCEN and submitted their BOIRs do not have to update their registration in the event of any changes that previously would have been made

Is the CTA dead?

No. The decision in the Texas Top Cop Shop case is merely a preliminary injunction, which could, in the future, be vacated. However, it is a significant blow to the CTA, as it challenges the constitutionality of its reporting requirements.

How does this differ from the previous decision made in Alabama last Spring?

Some of you may recall the US District Court in Alabama in National Small Business United v. Yellen, No. 5:22-cv-01448 (N.D. Ala.), issued a decision striking down the CTA as unconstitutional. However, the effect of that case was limited to just the Plaintiffs in that case. In Texas Top Cop Shop, Judge Mazzant expressly made this a nationwide injunction, ruling that it is likely unconstitutional and the companies nationwide “need not comply” with the initial reporting deadline prior to January 1, 2025 for the time being.

More on the Corporate Transparency Act

As a reminder, if the injunction is lifted, we will not be responsible for reporting your company’s information to FinCEN. That is a requirement you or someone in your company will need to complete, though we are here to assist you with this process.

We will continue to provide updates on the Corporate Transparency Act as new developments arise. For the latest insights and guidance on the CTA, please visit the FinCEN's website, review our previous article on the CTA, or reach out to our CTA Taskforce Team at CTA@brickergraydon.com for assistance.