What Businesses Need to Know About the New Corporate Transparency Act Injunction

You may have heard about the Corporate Transparency Act (“CTA”) and its upcoming January 1st deadline for filing beneficial ownership information reports. A recent federal court ruling has hit pause on its enforcement nationwide. Here is what you need to know for now.

The CTA is a federal law that requires certain companies to file reports with FinCEN, providing information about their company’s beneficial owners. Read more about that here.

On December 3, 2024, a federal court in Texas issued a preliminary injunction in Texas Top Cop Shop, Inc., et. al., v. Garland, et. al. that temporarily blocks enforcement of the CTA, including its filing deadlines. Case No. 4:24-cv-00478 (E.D. Tex.). The court ruled that the plaintiffs in the case are likely to succeed in their constitutional challenge to the CTA.

In a nutshell, this means that reporting companies are not currently required to file beneficial ownership reports or face penalties for not doing so while the injunction is in effect.

Importantly, the court has not given a final ruling that the CTA unconstitutional—it has only issued a temporary stop to enforcement. An appeal has been filed, so this situation could change.

For now, compliance with the CTA is effectively on hold nationwide. FinCEN issued an alert confirming that businesses are not obligated to file beneficial ownership reports during the injunction period. However, they have also said that businesses can file reports voluntarily if they choose to.

Now what? Here are some considerations for businesses deciding what to do:

• No Immediate Action Required: You are not legally required to submit a BOI report while the injunction is in place, and there is no penalty for failing to do so.
• Stay Prepared: While enforcement is paused, it might be prudent to pull together the information you would need to comply if the CTA’s requirements are reinstated. Having your report ready could save you a headache later.
• Voluntary Filing Is Optional: FinCEN’s suggestion to submit reports voluntarily has raised eyebrows among some professionals who suggest waiting until the legal dust settles before filing anything; others are continuing to file BOI reports.

Monitor developments in the CTA and consult with your attorney. For example, if the injunction is overturned, the January 1, 2025, deadline could be reinstated or extended, depending on the timeline of the legal guidance.

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