On December 3, 2024, the United States District Court for the Eastern District of Texas issued a nationwide preliminary injunction enjoining the enforcement of the Corporate Transparency Act (“CTA”).[1] This injunction prevents FinCEN from enforcing the CTA’s Beneficial Ownership Information (“BOI”) reporting requirements nationwide and stayed the January 1, 2025 reporting deadline for entities formed before 2024. While the District Court did not rule on the CTA’s constitutionality, for purposes of the injunction, the Court concluded that the CTA is likely unconstitutional because it exceeds Congress’s constitutional authority.
It is widely anticipated that the U.S. Department of Justice (“DOJ”) will appeal the preliminary injunction to the U.S. Court of Appeals for the Fifth Circuit and ask the appellate court to vacate or stay the injunction. While the timing of prospective court proceedings is not predictable, we expect there may be a ruling on whether to stay the injunction at some point before year end. Nonetheless, a decision on FinCEN’s potential appeal as to the constitutionality of the CTA may take much longer. FinCEN has not yet issued a response to the District Court’s injunction, but we expect that it will do so and provide further clarity here in the coming days.
In the meantime, until the issue is finally decided we recommend that clients proceed in timely filing their BOI reports (including, for non-exempt entities that existed prior to January 1, 2024, by January 1, 2025’s deadline), as we continue to monitor the developments of this case. If there are entities who prefer to delay filing for any reason, we recommend consulting with legal counsel, and continuing to monitor the developments to reassess once new guidance and/or rulings following the December 3rd preliminary injunction are issued.