As we previously reported, the Corporate Transparency Act (CTA) requires a broad class of legal entities (referred to as “reporting companies”) to identify and report beneficial ownership information to the Treasury Department’s Financial Crimes Enforcement Network (FinCEN). Under the CTA, entities formed after January 1, 2024—and which are otherwise not exempt from the CTA’s reporting requirements—are required to file their initial Beneficial Ownership Information Report (BOIR) with FinCEN within 90 days of their formation, and non-exempt entities formed before January 1, 2024, are required to file their initial BOIR with FinCEN by January 1, 2025.
On December 3, 2024, Judge Amos L. Mazzant of the U.S. District Court of the Eastern District of Texas issued a preliminary injunction in Texas Top Cop Shop, Inc., et al. v. Garland, et al. (E.D. Tex., No. 4:24-cv-00478) enjoining the federal government from enforcing the CTA (including the related implementing rules).
Unlike prior court rulings regarding the enforceability of the CTA, Judge Mazzant’s order clearly enjoined enforcement of the CTA throughout the United States and explicitly stayed the upcoming January 1, 2025, deadline for reporting companies formed before January 1, 2024. While in place, the order relieves all companies otherwise subject to the CTA from complying with the CTA, including submission of BOIRs. While the portion of the order that stayed any deadlines under the CTA referenced only the January 1, 2025, deadline, the order is clear that enforcement of the CTA is fully enjoined as to all reporting companies.
As such, the court’s order can credibly be read to effectively stay all compliance deadlines under the CTA, including for initial BOIRs for entities formed on or after January 1, 2024, and for any updates required to previously filed BOIRs.
As this was only a preliminary injunction, we expect further developments regarding this case, which may include an appeal by the federal government to overturn or narrow the preliminary injunction, or ultimately, a decision by the court on the merits of the case (as well as resolution of any subsequent appeals from that decision).
While the status of the CTA’s ultimate enforceability remains uncertain, we encourage you to consult your experienced counsel with questions you may have, including preparations you should consider now to be ready to comply with the CTA should compliance requirements be reinstated.
In the coming days, we hope FinCEN will provide an update on this case as it did with the National Small Business United v. Yellen (N.D. Ala., No. 5:22-cv-01448) decision. Fenwick will continue to monitor further developments.
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