ARTICLE
9 December 2024

CTA Preliminarily Enjoined Nationwide By A Texas Federal Court

On December 3, 2024, the District Court for the Eastern District of Texas, Sherman Division, issued a nationwide preliminary injunction against the enforcement...
United States Texas Corporate/Commercial Law

On December 3, 2024, the District Court for the Eastern District of Texas, Sherman Division, issued a nationwide preliminary injunction against the enforcement of the Corporate Transparency Act (CTA) and the reporting rules issued by the Financial Crimes Enforcement Network (FinCEN). The CTA, which went into effect on January 1, 2024, requires reporting companies to provide a beneficial ownership information (BOI) report detailing their beneficial owners, as further detailed here. However, the ruling in this case enjoins the enforcement of the CTA and the reporting rules implemented by FinCEN under the CTA until further determination by the appropriate court. Consequently, reporting companies are NOT required to file any BOI reports by the January 1, 2025 deadline, pending further developments.

In Texas Top Cop Shop, Inc. et al. vs. Garland (U.S. Attorney General), six Plaintiffs (one individual and five entities) contended that the CTA and the related reporting rules were unconstitutional. In granting the Plaintiffs' motion for a preliminary injunction, the Court did not rule that the CTA and its reporting rules were in fact unconstitutional, but did state that the CTA and the reporting rules are "likely unconstitutional as outside of Congress's power." The Court found that the Plaintiffs had standing to sue and had met the burden for a preliminary injunction.

As a result, reporting companies nationwide are not required to file any BOI reports until the case proceeds through the court system and a further order is issued by the appropriate court.

See Texas Top Cop Shop, Inc. v. Garland, No. 4:24-cv-00478 (E.D. Tex.).

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