As described in a prior article, beginning on January 1, 2024, the Corporate Transparency Act required companies to report beneficial ownership information (“BOI”) to the Financial Crimes Enforcement Network bureau (“FinCEN”) of the U.S. Department of the Treasury.
On December 3, 2024 the U.S. District Court for the Eastern District of Texas granted a preliminary injunction in Texas Top Cop Shop, Inc. et al. v. Garland et al., No. 4:24-CV-478 (E.D. Texas 12/3/24), which blocks enforcement of the CTA by FinCEN against all companies (unlike an Alabama ruling in March which only granted relief to that case’s plaintiffs) and stays all CTA reporting deadlines. As a result of the injunction, no one is required to file any BOI reports at this time.
In its Memorandum and Order, the Court found that the plaintiffs had met the requirements for a preliminary injunction and that the CTA is “likely unconstitutional as outside of Congress’s power.” The Court’s reasoning is supported by the finding that the CTA does not regulate commerce, as permitted under the Commerce Clause, but rather it attempts to create an activity where none currently exists. Additionally, the Court similarly found the CTA was not allowable under the Necessary and Proper clause, as applied with both the Commerce Clause and Congress’s powers to regulate foreign affairs.
The federal government has made no public announcement on its next steps, but it is expected that the Department of Justice will promptly appeal. While all CTA reporting deadlines are currently stayed, if the injunction is overturned, companies may once again have to file BOI Reports.
