On December 3, 2024, the U.S. District Court for the Eastern District of Texas issued a preliminary injunction, temporarily blocking enforcement of the Corporate Transparency Act (“CTA”) and its reporting rule on a nationwide basis.[1]
For the time being, the preliminary injunction means reporting companies are not required to comply with the CTA’s reporting requirements because FinCEN is temporarily blocked from enforcing the CTA and its reporting rule. The preliminary injunction is not a final resolution, and the U.S. Department of Justice has appealed the ruling to the U.S. Court of Appeals for the Fifth Circuit. As of now, FinCEN has not issued any commentary or guidance on the preliminary injunction, but it can be expected that it will do so.
While reporting companies are relieved from CTA compliance for the moment, they should continue to familiarize themselves with the CTA’s requirements, gather necessary beneficial ownership information and prepare to promptly make CTA filings if the preliminary injunction is lifted or a final decision upholds the CTA. Given that the filing process places potentially sensitive information with the government, some reporting companies may want to wait to see whether there is a resolution of the matter before making a CTA filing. However, FinCEN is still accepting CTA filings while the preliminary injunction is in place. Therefore, a conservative approach for some reporting companies may be to continue to file under the CTA against the backdrop of an uncertain future.
For more information on the CTA, please refer to our earlier publications (July and September 2024 Update, A Series of the Latest Updates for Reporting Companies, and The Corporate Transparency Act: A New Federal Disclosure Requirement for Certain Entities) or FinCEN’s small business resource webpage for beneficial ownership information (available here). If you would like assistance with and/or have questions regarding CTA compliance or filings, please contact Aaron Kacer or Steve Lawrence.
[1] Texas Top Cop Shop, Inc., et al. v. Garland, et al. (Case No. 4:24-CV-478 (E.D. Tex. Dec. 3, 2024).
