Corporate Transparency Act Temporarily Blocked
On December 3, 2024, a Texas federal court blocked the implementation and enforcement of the Corporate Transparency Act (the “CTA”) nationwide, finding that the law is likely unconstitutional.* The CTA requires certain companies to report personal information about their beneficial owners to the Financial Crimes Enforcement Network. Entities formed prior to January 1, 2024 are required to report such information by January 1, 2025 and entities formed between January 1, 2024 and January 1, 2025 are required to report within 90 days of their formation.?
The federal court ruled that the CTA likely exceeds Congress’ authority under the Commerce Clause and the Necessary and Proper Clause. The court further noted that the reporting requirements are overly broad, failing to distinguish between entities engaged in commerce and those that are not. As a result of its conclusions, the court enacted a temporary nationwide injunction over the CTA and all its obligations. Therefore, the deadlines are stayed until further notice.
While this ruling halts implementation and enforcement of the CTA across the U.S., the injunction is temporary and will likely be appealed. Companies should remain prepared to comply with the CTA as the obligations are rapidly changing and its extremely short compliance deadlines could be reinstated at any time. ?
??????????????? If you have any questions about how this impacts your company, please reach out to your primary contact at Gray Ice Higdon or a member of our CTA Group: Casner Wheelock, Sam Wright, Anna Deye, and Janis Howard.
Disclaimer: This summary is current as of December 4, 2024. It does not contain all aspects of the applicable ruling or the CTA and is subject to change. The information contained in this communication is not legal advice and is not intended or written to be used, and cannot be used, for the purpose of avoiding penalties under or related to the CTA.
?* Texas Top Cop Shop, Inc., et al v. Merrick Garland, Attorney General of the United States, et al., No. 4:24-CV-478, 2024 WL 4953814 (E.D. Tex. Dec. 3, 2024).