Federal Court Blocks Enforcement of CTA
A Texas Federal Court granted a nationwide preliminary injunction against the Corporate Transparency Act (CTA) scheduled to become effective on January 1, 2025. The court cited potential constitutional issues with the CTA’s Beneficial Ownership Reporting requirements and acknowledged there was sufficient injury to warrant this preliminary injunction.
In the absence of this injunction or an applicable exemption, the CTA mandates all U.S. registered legal entities to disclose information regarding their beneficial owners and any individuals with significant control to the Financial Crimes Enforcement Network (FinCEN), a bureau of the U.S. Treasury, by year’s end.
This injunction brings welcome relief to many companies working through the process of determining their reporting requirements as well as gathering the necessary documentation for this new filing.
What’s Next
The preliminary injunction provided by the Eastern District Court of Texas temporarily alleviates the immediate reporting requirements for the estimated 32.6 million existing business affected. However, the legal validity of this act and the related reporting remain unresolved.
Several courts, including the Eleventh Circuit Court of Appeals, are currently weighing the constitutionality of this reporting. It is possible that this act may require Supreme Court review for a final decision.
RKL will continue to monitor developments and provide updates as the situation unfolds in the courts.
The case in reference, originating from the Eastern District of Texas, is cited as Texas Top Cop Shop, Inc. v. Garland, bearing docket number 4:24-cv-00478, and was filed on December 3, 2024.
