On December 3, 2024, the United States District Court for the Eastern District of Texas issued a nationwide injunction against the Corporate Transparency Act (“CTA”) in Texas Top Cop Shops v. Garland. Effective January 1, 2024. Following this ruling, the U.S. Treasury Department’s Financial Crimes Enforcement Network (“FinCEN”) issued a statement confirming that reporting companies do not have to comply with the CTA while the preliminary injunction remains in effect.
The CTA requires entities (“reporting companies”) established by filing a filing with the Secretary of State or similar agency to identify “beneficiaries” in a Beneficiary Information Report (“BOIR”) unless exempted by regulation. is required to be reported to FinCEN. Send to CTA. As defined in the CTA, a beneficial owner is an individual who (a) owns or controls, directly or indirectly, 25% or more of the stock of the reporting company, or (b) exercises substantial control. point. To learn more about CTAs, see our previous blog.
Plaintiffs in the case argued that the CTA exceeded Congress’ authority and violated the First, Fourth, Ninth, and Tenth Amendments to the U.S. Constitution. In issuing a preliminary injunction to enjoin enforcement of the CTA, the court held (contrary to the position taken by federal district courts in Oregon and Virginia in previous cases) that plaintiffs could prevail on the merits of the case. Although he inferred that there was a high degree of sexual activity, he did not win the case. Affirmative finding that the CTA violated the U.S. Constitution. Nevertheless, the court’s ruling applies nationwide, as the BOIR filing deadline for entities formed before January 1, 2024 approaches the end of the year, and January 1, 2024 This means that entities established after that date will be subject to a 90-day requirement to file an initial report. The 30-day filing requirement for reporting companies to update previously filed reports is currently suspended.
In response to the Texas court order, on December 5, 2024, the Department of Justice filed a notice of appeal with the Fifth Circuit Court of Appeals, asking the court to stay the preliminary injunction pending trial.
In a statement posted on its website, FinCEN confirmed that while CTAs are prohibited and litigation is ongoing, reporting companies are not required to file BOIRs or are subject to penalties for violations. However, reporting companies may continue to voluntarily file BOIRs during this period. Notably, FinCEN did not indicate whether the filing deadline adjustments would apply if the injunction were lifted. This means that the status of filing obligations may change in the short term. If the order is suspended and the CTA becomes enforceable again, FinCEN may adjust the deadline, but this outcome is not guaranteed.
Reporting companies should monitor developments in this case and consult their legal advisors regarding the latest CTA compliance requirements, if any.
