CTA Enforcement Enjoined

The CTA Enforcement Preliminarily Enjoined Nationwide By A Texas Federal District Court

?On December 3, 2024, a federal district court in Texas ?preliminarily enjoined nationwide the enforcement of the Corporate Transparency Act (CTA) as ?likely unconstitutional. Thus, CTA rules ?cannot be enforced against non-exempt reporting entities that would have been subject to the rule. Such companies ?would have been required to report beneficial ownership interest information by the end of this year.

?The CTA was passed in 2021 and requires all corporations, limited liability companies, and certain other entities created (or, as to non-U.S. entities, registered to do business) in any U.S. state or tribal jurisdiction to file a beneficial ownership interest (BOI) report with the U.S. Financial Crimes Enforcement Network (FinCEN), which would show ?the identity of natural persons who are beneficial owners of the entity. An implementing rule - the Reporting Rule – specifies compliance deadlines—including a January?1, 2025 deadline for companies created or registered to do business in the United States before January?1, 2024.

?In a prior action, on ?March?1, 2024, the U.S. District Court for the Northern District of Alabama had already ruled that the CTA is unconstitutional and permanently enjoined its enforcement, though applicable ?only to the plaintiffs in that case. Upon appeal by the government, the Alabama case is currently pending a decision by the Eleventh Circuit.

While the Reporting Rule is unenforceable for now, it is still possible that either the Fifth Circuit or the U.S. Supreme Court may stay the Texas injunctive order upon appeal. If that happens, reporting entitles will have a very short window to comply.

?Stay tuned!!