Many of our clients whose entities were formed before January 1, 2024 have been working toward complying with the upcoming deadline to file information about their beneficial owners pursuant to the Corporate Transparency Act. On December 3, 2024, the U.S. District Court for the Eastern District of Texas imposed a preliminary injunction that enjoins the federal government from enforcing the Corporate Transparency Act (CTA). This is a nationwide injunction affecting every entity that would be required to file a report pursuant to the CTA. These reports are made to the Treasury Department’s Financial Crimes Enforcement Network (FinCEN).
There have been other lawsuits challenging the constitutionality of the CTA, but this is the first where an order has attempted to stay enforcement of the Act nationwide. The judge’s order found that the plaintiffs were likely to succeed on the merits of their claims challenging the constitutionality of the CTA. Even though the plaintiffs only asked for a preliminary injunction for themselves, the Court issued a broad nationwide injunction instead.
The order bans enforcement of the CTA and the rules adopted by FinCEN to implement the CTA. It states that companies do not need to comply with the January 1, 2025 deadline for filing beneficial ownership reports. However, we note that this order is only a preliminary injunction, not a final decision. It could be overturned on appear or in the lawsuit itself. No appeal has been announced, but the government is widely expected to appeal the order.
If you have questions about how this order affects your company, please contact your business lawyer.