Nationwide Injunction Halts Corporate Transparency Act: What It Means for Your Business
Corporate Transparency Act (CTA)
On December 3, 2024, the U.S. District Court for the Eastern District of Texas issued a nationwide preliminary injunction, temporarily suspending the enforcement of the Corporate Transparency Act (CTA).
The decision in Texas Top Cop Shop, Inc. v. Garland pauses the requirement for businesses to report beneficial ownership information (BOI) to the Financial Crimes Enforcement Network (FinCEN), which was set to take effect on January 1, 2025.
This ruling marks a significant development in the ongoing legal challenges to the CTA, raising critical questions about federal authority and the future of corporate disclosure mandates.
The government is expected to appeal the Texas decision, which could prolong the legal uncertainty surrounding the CTA.
What Businesses Need to Know Now
The preliminary injunction pauses enforcement of the CTA’s BOI reporting rules, meaning:
- Businesses are temporarily not required to meet the January 1, 2025, filing deadline.
- Reporting companies should remain prepared, as this injunction is not a final ruling on the CTA’s constitutionality, and future legal proceedings may impact this order.
Why the Injunction Was Issued
Judge Amos Mazzant, who presided over the case, determined that the CTA and its Reporting Rule are “likely unconstitutional” under federal law. His key arguments include:
- Federal Overreach: The court found the CTA infringes on states’ rights under the Tenth Amendment, as it attempts to regulate domestic business governance, traditionally a state matter.
- Constitutional Concerns: While the government argued that the CTA is necessary to combat money laundering and related crimes, the court found these justifications insufficient to warrant extensive federal oversight.
- Nationwide Scope: Although the plaintiffs only sought relief for specific parties, the court expanded the injunction nationally, citing the widespread constitutional implications.
Ongoing Legal Battles and What’s Next
The Texas ruling is part of a broader challenge to the CTA. Earlier this year, the Northern District of Alabama raised constitutional concerns in NBSU v. Yellen, a case now on appeal before the Eleventh Circuit.
In contrast, the District Court of Oregon took a different stance, upholding the CTA filing requirements in Firestone v. Yellen.
As these cases progress across multiple courts, their outcomes are likely to shape the future of federal reporting mandates and their enforcement.
Recommendations for Businesses
While the injunction provides temporary relief, businesses should remain vigilant:
- Stay Prepared: Gather and organize beneficial ownership information now, as compliance may still be required if the injunction is overturned.
- Monitor Updates: Legal developments and potential FinCEN guidance may impact your reporting obligations.
- Consult Professionals: Work with your tax and legal advisors to assess how these changes may affect your compliance strategies.
Looking Ahead
If your business operates in the U.S., navigating these shifting legal requirements can be complex and challenging.
Should the injunction be overturned on appeal, businesses will need to act quickly to meet the reporting requirements. We recommend that affected companies continue gathering the necessary information to ensure they can fulfill their filing obligations without delay.
As your trusted advisors, Andersen will continue monitoring these developments and provide timely updates to ensure your business is compliance and well positioned for any changes ahead.
For more information or assistance with compliance planning, please contact our team.
Andersen Canada Contact
 | Namir Hallak CPA, CA, CPA (Kansas), CGMA |
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