Corporate Transparency Act Enforcement Temporarily Halted by Nationwide Injunction

06 December 2024

On December 3, 2024, the U.S. District Court for the Eastern District of Texas issued a preliminary injunction in Texas Top Cop Shop, Inc. v. Garland, ruling that the Corporate Transparency Act (CTA) is likely unconstitutional. This injunction prevents enforcement of the CTA and its Beneficial Ownership Information (BOI) reporting requirements.

The CTA, effective January 1, 2024, requires certain entities to disclose ownership information to the U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN). While the court’s decision halts enforcement, the deadlines technically remain in place. FinCEN cannot enforce BOI filing requirements as the case progresses, but businesses should still prepare for compliance.

Best practices for those assisting clients with BOI reporting include gathering required ownership information to ensure readiness if the injunction is lifted. Although it is unlikely the injunction will be reversed before the litigation concludes, an appellate court could allow enforcement to resume with little notice.

The final outcome of the case remains uncertain, and businesses should continue to monitor updates from FinCEN and prepare to file if the injunction is overturned. Staying proactive will mitigate risks associated with potential enforcement reinstatement. Organizations are encouraged to consult with their legal counsel to understand how this ruling may impact their compliance obligations.

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