On December 3, 2024, a federal district court in the Eastern District of Texas1 issued an order granting a nationwide preliminary injunction that: (1) enjoins (or halts) the enforcement of the Corporate Transparency Act (CTA) and the regulations implementing its information reporting requirements, and, specifically, (2) stays (or pauses) all deadlines to comply with the CTA's reporting requirements. The Department of Justice filed a Notice of Appeal on December 5, 2024.
On December 6, 2024, the U.S. Treasury Department's Financial Crimes Enforcement Network (FinCEN) issued a notice to the public stating that, in light of the preliminary injunction, companies are not currently required to file their information reports with FinCEN and will not be subject to liability if they fail to do so while the preliminary injunction remains in effect. FinCEN indicated that companies may continue to voluntarily submit the information reports.
Congress passed the CTA as part of an anti-money laundering package in the 2021 National Defense Authorization Act, with the aim of curbing illicit financial activities, like tax evasion, money laundering, drug trafficking and terrorist financing. As described in our December 2023 and August 2024 newsletters, under the CTA, many corporations, limited liability companies, limited partnerships and similar legal entities are required to report ownership and management information (known as beneficial ownership information, or BOI) to FinCEN.2
In light of the preliminary injunction and FinCEN statement described above, we recommend that companies continue preparations to comply with the CTA. It is not known whether or when the preliminary injunction may be lifted (or canceled), and, if it is lifted or canceled before January 1, 2025, whether or to what extent FinCEN will extend the January 1, 2025, filing deadline.
For additional information relating to the CTA, visit FinCEN's BOI web page.
Footnotes
1. In the case of Texas Top Cop Shop, Inc. v. Garland, et al., No. 4:24-cv-00478.
2. Corporations, limited liability companies, limited partnerships, and similar legal entities formed before 2024 must file their BOI reports no later than January 1, 2025; those formed in 2024 must file their BOI reports within 90 days of formation. Certain companies, such as banks, registered investment advisers, and large operating companies, are exempt from the CTA reporting obligation. For additional information, visit FinCEN's BOI web page.
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