Corporate Transparency Act Enjoined

On December 3, 2024, the U.S. District Court for the Eastern District of Texas issued a nationwide preliminary injunction against enforcement of the Corporate Transparency Act (the “CTA”) and stayed the January 1, 2025 beneficial ownership information (“BOI”) reporting deadline for entities formed prior to 2024. In Texas Top Cop Shop, Inc. v. Garland, No. 4:24-cv-00478-ALM (E.D. Tex.), the Court did not find the CTA to be unconstitutional but, for purposes of the injunction, concluded that the CTA and the final rule implementing the CTA are likely unconstitutional because they exceeded Congress’ authority.

As previously reported in the Sidebar, on March 1, 2024, the U.S. District Court for the Northern District of Alabama ruled that the CTA was unconstitutional in the case of National Small Business United, d/b/a The National Small Business Association, et al. v. Yellen, et al., but limited its injunction against enforcement to the plaintiffs in that case. The Northern Alabama District Court decision is now on appeal to the U.S. Court of Appeals for the 11th Circuit and a decision is expected in Spring 2025. The Department of Justice has not yet decided whether to appeal the decision of the Eastern Texas District Court.

As a result of the Texas Top Cop Shop, Inc. decision, business entities formed prior to 2024 are not required to make BOI filings by the January 1, 2025 deadline (or sooner, in the case of reporting entities formed in 2024 required to file within 90 days following formation). However, that status could change on short notice based on further orders of the Eastern Texas District Court and/or the appeal of the Eastern Texas District Court.

In consideration of these developments, companies should consider whether to voluntarily file their BOI or to take a “wait-and-see” approach pending the outcome of the pending court proceedings. Companies opting not to voluntarily file should nevertheless undertake the analysis required to determine their reporting requirements under the CTA and their beneficial owners so that they can be prepared to file if the filing obligation is reinstated. The attorneys at Poole Shaffery would be happy to assist you with your CTA analyses and filings.