12/3/2024: Texas Federal Court Suspends Corporate Transparency Act Enforcement Nationwide
On December 3, 2024, the U.S. District Court for the Eastern District of Texas issued a nationwide preliminary injunction, pausing enforcement of the Corporate Transparency Act (CTA) and its beneficial ownership information (BOI) reporting requirements. This ruling, issued in Texas Top Cop Shop, Inc. v. Garland, halts the January 1, 2025, compliance deadline for reporting companies across the United States.
Judge Amos Mazzant ruled that the CTA likely exceeds Congress’s authority under the Commerce Clause and the Necessary and Proper Clause. This decision comes amid growing debate over the constitutional validity of the CTA, which mandates companies to disclose identifying information about their beneficial owners.
What the Ruling Means for Businesses
The injunction has temporarily lifted the reporting obligations under the CTA for millions of businesses. However, the government is expected to appeal the decision to the Fifth Circuit and may seek an expedited stay to reinstate the compliance deadline. Businesses should remain vigilant, as the court's decision is not final and could be overturned or modified during the appeals process.
If the injunction is reversed, companies formed before January 1, 2024, will still need to file BOI reports with FinCEN by the original January 1, 2025, deadline. Civil and criminal penalties remain applicable for non-compliance should the reporting requirements be reinstated.
Next Steps for Reporting Companies
While the ruling suspends immediate obligations, businesses should prepare for the possibility of compliance resuming. Key actions include:
Gathering Required Information: Ensure you have the necessary documentation, such as ownership and control details, ready for submission if required.
Monitoring Legal Developments: Stay updated on the Fifth Circuit’s decisions or announcements from the Department of Treasury and FinCEN.
Avoiding Assumptions: Do not presume a permanent relief; readiness to comply ensures businesses are not caught unprepared if the injunction is lifted.
For companies that have already submitted BOI reports, the filings remain valid and could potentially support compliance with emerging state-level reporting rules.
A Look Ahead
The injunction introduces significant uncertainty just weeks before the compliance deadline. While many businesses welcome the pause, the legal battle over the CTA’s future is far from over. The government’s next steps—whether appealing the injunction or deferring the deadline—will shape how businesses approach compliance in the coming months.
Stay tuned for updates as the appeals process unfolds and new legal developments emerge. Businesses should remain proactive in tracking these changes to safeguard against potential penalties.
