On Tuesday, December 3, a Texas federal district court granted a nationwide preliminary injunction precluding FinCEN from enforcing the Corporate Transparency Act (CTA) and its implementing regulations. The CTA, which took effect January 1, 2024, requires most legal entities to electronically report beneficial ownership information by January 1, 2025 (unless an exemption applies). However, these reporting requirements, and the pending deadline, have been preliminarily blocked by the court’s injunction in Texas Top Cop Shop, Inc. v. Garland, E.D. Tex., No. 4:24-cv-00478.
In granting the injunction, Judge Amos L. Mazzant III of the US District Court for the Eastern District of Texas agreed with the plaintiffs’ argument that the CTA falls outside Congress’ powers to regulate interstate commerce because it seeks to regulate all entities regardless of whether they engage in commercial activity.
The court’s injunction blocking the CTA and its implementing regulations specifically stated that it applies nationwide and is effective immediately. It is important to note the injunction is not a final determination of the CTA’s constitutionality; instead, the injunction temporarily stays reporting requirements while the underlying substantive litigation on the legal questions proceed.
The federal government/FinCEN will likely appeal the decision. Reporting companies that have already filed information with FinCEN do not need to take any steps at this stage. Reporting companies that have not yet filed reports with FinCEN should consult with legal counsel about whether to wait to file reports with FinCEN, understanding the injunction could be quickly lifted on appeal and the year-end reporting deadline could be reinstated.
