On December 3, 2024, the U.S. District Court for the Eastern District of Texas issued a nationwide preliminary injunction enjoining the federal government from enforcing the Corporate Transparency Act (“CTA”).  Accordingly, with the injunction in place, reporting companies that were required to make any filings under the CTA are currently not required to make any filings.  If the court’s decision is overturned or modified, this may change.

As a reminder, the CTA is a new federal law that took effect on January 1, 2024.  It was enacted to combat money laundering, and under the CTA, all companies that are “reporting companies” must file beneficial ownership reports (“BOI reports”) with the Department of Treasury’s Financial Crimes Enforcement Network (“FinCEN”).  Additional background information on the CTA and its requirements and exemptions can be found in our previous client alerts of January 31, 2024 and October 15, 2024.

Update on Injunction

In the case Texas Top Cop Shop, Inc., et al. v. Garland,six plaintiffs, including Texas Top Cop Shop, Inc. and the National Federation of Independent Business (“NFIB”), filed a lawsuit in May 2024 challenging the constitutionality of the CTA on various grounds. 

On December 3, 2024, the U.S. District Court for the Eastern District of Texas found that the CTA and its implementing regulations are likely unconstitutional, and granted the plaintiffs’ motion for a preliminary injunction prohibiting the federal government from enforcing the CTA and its regulations.  The District Court determined that a nationwide injunction was necessary because one of the plaintiffs, the NFIB, represents members nationwide, and given the extent of the constitutional violation. 

Of note, in connection with the injunction, the District Court stayed the January 1, 2025 BOI report filing deadline for reporting companies created or registered to do business in the US before January 1, 2024. 

Next Steps

With the injunction in place, reporting companies that were required to make any filings under the CTA are currently not required to make any filings. 

However, the district court’s order is only a preliminary injunction, not a final decision.  The injunction temporarily pauses the federal government’s ability to enforce the CTA nationwide, but enforcement may resume if the injunction is overturned.

As a reminder, if the injunction is lifted, all companies that are reporting companies that were created or registered to do business in the US before January 1, 2024 may still be required to file their initial BOI report before January 1, 2025, unless FinCEN extends the deadline.    

If you may be subject to the January 1, 2024 filing deadline, we would recommend continuing to collect information and preparing to submit your BOI report if necessary, while we await further updates.  Casner & Edwards will continue monitoring developments closely. 

Questions

If you have any questions, please contact Casner & Edwards attorneys Peter Dunn, Michael Zullas, Steven Ayr, or Drew Douglas-Steele.