On December 3, 2024, the U.S. District Court for the Eastern District of Texas preliminarily enjoined the enforcement of the Corporate Transparency Act (the “CTA”), finding that “the CTA is likely unconstitutional as outside Congress’ power.” A nationwide stay was also issued regarding the December 31, 2024 CTA reporting compliance deadline for business entities formed before January 1, 2024 and not exempt from reporting under one of the CTA’s exemptions. The injunction is preliminary, and a final resolution will depend on appeals and further proceedings. If the government appeals (which could be affected by the second Trump presidency), the case will go to the U.S. Court of Appeals for the Fifth Circuit, and potentially the U.S. Supreme Court for a final resolution, with the stay on enforcement of the reporting rules likely to remain in effect throughout the appeals process.

The CTA requires most business entities to file a Beneficial Ownership Information (“BOI”) report to the U.S. Treasury’s Financial Crimes Enforcement Network (“FinCEN”), unless the entity is exempt from reporting under one of the CTA’s exemptions. Entities formed before January 1, 2024 were required to file their BOI reports with FinCEN on or before December 31, 2024. Entities formed on or after January 1, 2024, but before January 1, 2025, were required to file BOI reports within 90 days of formation. Entities formed on or after January 1, 2025 would have had 30 days to submit their BOI reports.

In making its ruling, the Court described the CTA as “quasi-Orwellian” and found that “because the reporting rule implements the CTA, it likely is unconstitutional for the same reasons.” Although the Court only addresses the December 31, 2024 reporting compliance deadline for existing entities, it is reasonable to assume that the stay also applies to the 30/90-day reporting rule for entities formed on or after January 1, 2024.

As of November 2024, more than 8 million BOI reports have been filed with FinCEN. Businesses that already filed an initial BOI report need not file any additional reports, including any amended or updated reports, until a final resolution is reached in the matter. Businesses that have not yet filed an initial BOI report should monitor for further updates and be prepared to file a report quickly should the injunction be overturned on appeal.

We have a team of attorneys who are prepared to assist with any questions you may have regarding the CTA and the preliminary injunction. If you have questions regarding the impact of the stay on your business, please contact us.