On December 3, 2024, the U.S. District Court for the Eastern District of Texas entered a nationwide preliminary injunction enjoining the enforcement of the federal Corporate Transparency Act (CTA) (31 U.S.C. § 5336) and the Beneficial Ownership Information Reporting Requirements Final Rule promulgated thereunder (Final Rule) (31 C.F.R. 1010.380) and staying the upcoming January 1, 2025, compliance deadline for entities in existence prior to 2024. The preliminary injunction applies to all reporting companies governed by the CTA and the Final Rule until further order of the court. The case citation is Texas Top Cop Shop, Inc. v. Garland, No. 4:24-cv-00478 (E.D. Tex.) and the court’s opinion and order are available here.
In its opinion, the court held that the plaintiffs showed a substantial likelihood of success on the merits of their claim that the CTA was not enacted pursuant to any of Congress’ enumerated powers and, as a result, was unconstitutional under the Tenth Amendment of the U.S. Constitution. Notwithstanding that holding, the court’s opinion did not conclusively determine that the CTA was unconstitutional and expressly reserved that question for “another day.”
Because the status of the preliminary injunction and the upcoming January 1, 2025, compliance deadline may change rapidly, all reporting companies should closely monitor for updates and assess whether to adjust their timelines for compiling the materials necessary to file any Beneficial Ownership Information Reports required under the CTA or the Final Rule. Specifically, the federal government may seek to appeal the preliminary injunction on an expedited basis or take other actions on the basis of the court’s decision that may result in the reinstatement of the January 1, 2025, compliance deadline for reporting companies in existence prior to 2024. Developments in other pending litigation challenging the constitutionality of the CTA may also impact the applicability of the court’s order. Finally, we note that the court’s decision does not specifically stay the compliance deadlines for entities formed on or after January 1, 2024. Given the court’s silence on that issue, such reporting companies should carefully assess their ongoing compliance obligations under the CTA and the Final Rule.
Our CTA Task Force will continue to monitor for relevant developments, with periodic updates accessible at our CTA resource page.
