Federal Judge Issues Nationwide Injunction On Enforcement of Corporate Transparency Act
On December 3, 2024, Judge Amos Mazzant of the U.S. District Court for the Eastern District of Texas issued a nationwide preliminary injunction blocking enforcement of the Corporate Transparency Act (CTA) in Texas Top Cop Shop v. Garland et al. The CTA, effective January 1, 2024, requires most U.S. and foreign entities registered to do business in the U.S. to report their beneficial ownership information (BOI) to the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) by January 1, 2025.
The Court found that the CTA imposes significant compliance costs on businesses without sufficient safeguards against data misuse. It also emphasized that corporate regulation has traditionally been a state function and ruled that the federal government had not demonstrated the CTA falls within Congress’s constitutional powers. As a result, the Court deemed the act likely unconstitutional.
What Does This Mean for Business Owners?
- For businesses that have already filed BOI reports: No further action is required at this time, including filing updates, until a final ruling is issued.
- For businesses that have not yet filed: You can pause preparation and filing of your BOI report until a final decision in the case is reached, though this may take time.
- Stay alert for updates: This is a preliminary ruling. If the injunction is overturned on appeal and the CTA enforcement resumes, businesses may need to quickly comply with reporting requirements to meet deadlines.
It is crucial for business owners to monitor developments in this case to ensure ongoing compliance with any future changes.
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