A federal court sitting in the Eastern District of Texas has issued a nationwide preliminary injunction suspending the enforcement of the Corporate Transparency Act (CTA) for all reporting companies.

Under the CTA, certain entities are required to report beneficial ownership information (BOI) to the Financial Crimes Enforcement Network (FinCEN). Under the CTA, if a reporting company was created before January 1, 2024, it must file a BOI report before January 1, 2025. For more information on CTA requirements please check out PSRB’s article Corporate Transparency Act: What Your Business Should Know.

Preliminary Injunction Issued by Texas Federal Court

A significant legal development occurred on December 3, 2024, when the United States District Court for the Eastern District of Texas issued a preliminary injunction that temporarily prevents the federal government from enforcing the CTA against all reporting companies.

This injunction was issued after a lawsuit was filed challenging the constitutionality of the CTA. The plaintiffs argued that the CTA’s disclosure requirements were overly broad and violated constitutional protections. They sought to halt the implementation of the CTA’s reporting requirements pending a final ruling.

The court’s order did not rule on the constitutionality of the CTA, but it did find that the plaintiffs were likely to succeed on the merits of their claims. The order sharply criticized the CTA for exceeding constitutional limits and emphasized that corporate regulation has historically been within the jurisdiction of individual states.

The court did not limit its injunction to the plaintiffs. Rather, the court held that a “nationwide injunction is appropriate” and should apply nationwide.

What does this mean for reporting companies?

The court’s injunction means that reporting companies are currently not required to submit BOI reports. The injunction could be lifted at any time. FinCEN has issued a statement confirming that reporting companies are not currently required to file BOI reports. The statement does not address whether the initial CTA deadlines—including the January 1, 2025 deadline for reporting companies created before January 1, 2024—would be extended in the event the injunction is lifted prior to the new year. FinCEN is still accepting voluntary reports at this time, and defendants have filed an appeal to the United States Court of Appeals for the Fifth Circuit. To consult about what this means for your business please contact Ali Sylvia, Joanne Sommers, or Mary Claire Tuohy at Plews Shadley Racher & Braun LLP.

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Tagged In: business, Corporate Transparency Act