On December 3, 2024, an order of the United States District Court for the Eastern District of Texas granted a nationwide injunction halting enforcement of the Corporate Transparency Act (“CTA”) and regulations enacted under the CTA by the Treasury Department’s Financial Crimes Enforcement Network (“FinCEN”). This order stays the January 1, 2025, reporting deadline.[1] Although the United States government is expected to challenge the order, there has been no official statement from FinCEN or the Treasury Department at the time of this writing.[2]
Importantly, while the order states it is “likely” that the CTA and its beneficial ownership reporting regulations are illegal or unconstitutional, it is not a final determination on those arguments.[3] The injunction is only a prohibition on enforcement, subject to further appeal.
A higher court may later set aside this injunction entirely or limit its effect to the plaintiffs in this case, or to reporting companies within the state of Texas or its Eastern District, or otherwise. Even if an emergency appeal is filed, however, it is not likely to reach resolution in the courts before January 1, 2025.
This leaves millions of entities and business owners otherwise within the scope of the CTA in limbo.
While the filing of Beneficial Ownership Information Reports at https://boiefiling.fincen.gov/ remains technically possible, the practical reality is that submission of those reports is likely to grind to a halt in light of the injunction.
Those reporting companies and responsible individuals who had efforts underway to comply with the CTA (such as gathering necessary information on beneficial owners or analyzing the availability of an exemption from the reporting requirement) must decide whether to see those efforts through to completion or not, and whether to submit beneficial ownership information to FinCEN notwithstanding this injunction or stand by and watch for more definitive resolution from the courts.
[1] Texas Top Cop Shop, Inc. v. Garland, No. 4:24-CV-478, 2024 U.S. Dist. LEXIS 218294, at *112–14 (E.D. Tex. Dec. 3, 2024).
[2] Financial Crimes Enforcement Network, News, https://www.fincen.gov/news-room/news (last visited Dec. 5, 2024, 10:00 AM); U.S. Dept. of the Treasury, Press Releases, https://home.treasury.gov/news/press-releases (last visited Dec. 5, 2024, 10:00 AM).
[3] Texas Top Cop Shop, Inc. v. Garland, No. 4:24-CV-478, 2024 U.S. Dist. LEXIS 218294, at *113 (E.D. Tex. Dec. 3, 2024).
