CLIENT ALERT
By Attorneys Abbygale Martinen Dow and Mark Ventola
A federal judge in Texas has instituted a nation-wide injunction, halting the enforcement of the Corporate Transparency Act (“CTA”) and its associated Reporting Rule, which required “reporting companies” to submit reports to the Financial Crimes Enforcement Network (“FinCEN”) detailing the identity of each beneficial owner of the reporting company by January 1, 2025.
In Texas Top Cop Shop, Inc., et al., v. Merrick Garland, Attorney General of the United States, et al., the plaintiffs challenged the constitutionality of the CTA. On December 3, 2024, the presiding Judge issued a preliminary injunction, stopping the enforcement of the CTA and finding that the plaintiffs had demonstrated the necessary requirements for a preliminary injunction.
What this means for businesses: The January 1, 2025, compliance deadline for the required reporting under the CTA has been stayed and currently businesses do not need to submit their beneficial owner reports until further notice.
This injunction is preliminary and it will very likely be subject to appellate review, which could again change the landscape, based upon the ultimate decision on appeal. If your business has not already submitted its beneficial owner report to FinCEN ahead of the January 1, 2025 deadline, you may want to have the needed information ready to go, in the event that the preliminary injunction is lifted in the next 28 days and the January 1, 2025, compliance deadline is reinstated.
Even if the preliminary injunction is not appealed or remains in effect pending appellate review, this is only the beginning and businesses should keep an eye on this case moving forward in the event that the Court does make a final decision and/or a final injunction in the future. Stay tuned.
This article is intended to serve as a summary of the issues outlined herein. While it may include some general guidance, it is not intended as, nor is it a substitute for, legal advice.