A Texas federal district court issued a nationwide preliminary injunction on December 3, 2024, pausing enforcement of the Corporate Transparency Act (“CTA”).[1] The CTA imposed beneficial ownership reporting requirements on most entities doing business in the United States (see our prior blog post on the CTA for more information). This ruling temporarily relieves reporting companies of their obligation to file beneficial ownership reports with the Financial Crimes Enforcement Network (“FinCEN”), and stays the upcoming January 1, 2025 reporting deadline for existing reporting companies.
Key Implications of the Injunction
- Temporary Suspension: FinCEN will not enforce CTA reporting requirements while the injunction is in effect. Companies are not obligated to file beneficial ownership reports but may do so voluntarily.
- Government Appeal: The Department of Justice (“DOJ”) has filed a notice of appeal to the U.S. Court of Appeals for the Fifth Circuit, challenging the district court’s injunction.[2]
- Uncertainty Ahead: With litigation ongoing, businesses face continued ambiguity regarding compliance timelines and obligations. FinCEN has stated reporting companies are not subject to liability for failing to report while the injunction is in place. It is possible that the Fifth Circuit vacates, narrows, or modifies the injunction prior to the upcoming January 1 reporting deadline. It remains unclear whether a change to the preliminary injunction would extend the upcoming reporting deadline. FinCEN is likely to provide updated guidance to address these concerns as legal proceedings unfold.
Recommended Next Steps for Businesses
- Stay Informed: Monitor updates from FinCEN and developments in the appeal process to anticipate any changes to the CTA’s status.
- Prepare Proactively: Work with legal advisors to evaluate your readiness and strategize for potential enforcement if the injunction is lifted.
This legal pause provides an opportunity for businesses to better understand their obligations and adopt a proactive approach to compliance in anticipation of future regulatory developments.
Please contact Zach Berger if you have questions or would like CTA-related assistance.
[1] Texas Top Cop Shop, Inc., et al. v. Garland, et al., No. 4:24-cv-00478 (E.D. Tex.)
[2] Notice of Appeal, Texas Top Cop Shop, Inc. v. Garland, No. 4:24-cv-478, 2024 WL 4953814 (E.D. Tex. Dec. 3, 2024).
