As the January 1, 2025 reporting deadline for beneficial ownership information under the Corporate Transparency Act ("CTA") quickly approaches, the United States District Court for the Eastern District of Texas ("Court") issued a critical decision which has caused significant uncertainty.1 On December 3, 2024, the Court issued a preliminarily injunction, temporarily blocking enforcement of the CTA and its reporting rule nationwide. The Court specifically stated "reporting companies need not comply with the CTA's January 1, 2025, [beneficial ownership information] reporting deadline pending further order of the Court."
The preliminary injunction follows the Court's determination that the CTA is likely unconstitutional and its implementation would irreparably harm reporting entities forced to comply. Importantly, the Court's ruling is not a final determination of the CTA's constitutionality. So, while the Court's ruling temporarily halts businesses' reporting obligations under the CTA nationwide, businesses should remain cautious and be on the lookout for any new developments.
KMK will continue to monitor the case and the status of the preliminary injunction. Companies are encouraged to continue monitoring the status of the injunction and their CTA filing obligations. To the extent that the injunction is overturned or narrowed from a nationwide injunction, companies may be required to continue making their CTA filings by the January 1, 2025 deadline.
Footnote
1. Texas Top Cop Shop, Inc., et al. v. Garland, et al., Case No. 4:24-cv-478 (E.D. Tex.).
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
