Court Blocks Enforcement of the CTA and Suspends January 1, 2025 Deadline

On December 3, 2024, a federal district court in Texas issued a nationwide preliminary injunction against the enforcement of the Corporate Transparency Act (“CTA”) in the case of Texas Top Cop Shop v Garland et al. In that case, the court held that the CTA was likely unconstitutional and granted a nationwide preliminary injunction enjoining the CTA and the enforcement of the CTA by the Financial Crimes Enforcement Network (“FinCEN”) of the U.S. Department of Treasury, including prohibiting the enforcement of the January 1, 2025 reporting deadline for filing a Beneficial Ownership Information Report (“BOI Report”). Enacted with the aim of increasing corporate transparency and combating money laundering, the CTA required certain businesses to report beneficial ownership information by filing a BOI Report with FinCEN. Companies formed after January 1, 2024, were required to file the BOI Report within 90 days of formation (but within 30 days on or after January 1, 2025) while companies formed before January 1, 2024 were given a deadline of January 1, 2025 for filing the BOI Report.

However, it should be noted that the decision in Texas Top Cop Shop case will likely not be the final decision on the CTA because it is expected that the U.S. government will appeal the preliminary injunction, that the nationwide injunction is preliminary in nature and could change in the future with the consideration by higher courts and that the FinCEN website is still accepting BOI reports as of the date of this alert. If the injunction is successfully challenged on appeal, the required compliance of CTA may be resumed quickly and could take the form of a short time frame for compliance. Thus, there is great uncertainty what any future reinstated CTA compliance requirements may be, and a very conservative approach would be to still file the BOI Reports to meet the deadlines mentioned above. Accordingly, despite the preliminary injunction issued by the Texas Top Cop Shop decision, companies should proceed with caution and determine for themselves whether it makes sense to still file the BOI Reports and satisfy the filing deadlines mentioned above or to wait and file the BOI Reports only if the preliminary injunction is ultimately lifted. As of December 4, 2024 Meyers Roman has suspended the filing of BOI Reports for our clients, unless a client specifically instructs us to proceed with the filing of their BOI Reports despite the preliminary injunction.

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