On December 3, 2024, the U.S. District Court for the Eastern District of Texas issued a preliminary injunction halting the enforcement of the Corporate Transparency Act (CTA) and its related regulations. This decision prevents the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) from requiring compliance with the CTA’s reporting obligations until further notice.
In the case of Texas Top Cop Shop, Inc. et al. v. Garland et al., No. 4:24-cv-478-ALM, the court found that the plaintiffs demonstrated a likelihood of success on the merits, including that the CTA might be unconstitutional and beyond Congress’s authority. As a result, the court granted the motion for a preliminary injunction and issued the following order:
- Enforcement of the CTA, 31 U.S.C. § 5336, is prohibited.
- The Reporting Rule under 31 C.F.R. 1010.380 cannot be enforced.
- The compliance deadline for reporting obligations is stayed under § 705 of the Administrative Procedure Act (APA).
- Companies are not required to meet the January 1, 2025, beneficial ownership reporting deadline.
Unlike a prior decision by the Federal District Court for the Northern District of Alabama in Nat’l Small Bus. United v. Yellen, No. 5:22-cv-01448-LCB, 2024 WL 899372 (N.D. Ala. Mar. 1, 2024), which limited relief to the specific plaintiffs involved, this injunction applies nationwide and affects all reporting companies.
Although the court’s order explicitly addressed the year-end filing requirements for entities formed before 2024, the injunction appears to cover all reporting deadlines under the CTA, including the 90-day filing period for businesses established in 2024. This stay will remain in effect unless the court modifies the ruling or an appeal overturns it.
Practical Implications for Businesses
While the injunction means companies are not currently required to submit CTA reports, it is prudent for businesses to continue preparing for potential future compliance. This includes determining whether the CTA applies to your organization and, if so, compiling beneficial ownership information. Taking these steps now will ensure readiness if reporting obligations are reinstated.
Next Steps
This ruling is a preliminary measure, and additional legal proceedings, including possible appeals by the Department of Justice, may alter the situation. We will provide updates as developments occur. Because this is a PRELIMINARY injunction, it is entirely possible that the requirements could be reinstated, and businesses should remain on alert and be prepared to complete the filing process in the future if required.
If you have questions about the CTA or how this injunction impacts your reporting obligations, our team is available to assist. Please don’t hesitate to reach out for tailored guidance.