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As previously outlined in our November blog post, the Corporate Transparency Act (CTA) was poised to impose significant federal reporting obligations on U.S. business entities starting January 1, 2025. However, a recent Federal District Court ruling has altered the compliance landscape dramatically.
On December 3, 2024, the court issued a nationwide preliminary injunction in Texas Top Cop Shop, Inc., et al. v. Merrick Garland, declaring the CTA likely unconstitutional. The injunction prohibits the Treasury Department from enforcing the Act while the case is under review. On December 5, the Treasury Department appealed the decision to the 5th U.S. Circuit Court of Appeals, but no guidance has been issued yet on the impact of the injunction.
What Does This Mean for Businesses?
This ruling effectively halts the January 1, 2025, CTA filing requirement for now. While businesses that were preparing to comply may be relieved, it is important to stay alert as the situation evolves. Here's what you need to know:
- No Immediate Filing Obligation
The injunction pauses the enforcement of CTA requirements, including the submission of Beneficial Ownership Information (BOI) reports to FinCEN. - Uncertainty Surrounding Compliance
Deadlines
If the injunction is lifted, compliance efforts may need to resume quickly. We expect reasonable notice for any reinstated deadlines, but businesses should be prepared to act promptly. - Legislative or Regulatory Action
Possible
It remains unclear if legislative changes or additional Treasury Department guidance will emerge to address the court's ruling or adjust the CTA framework.
Next Steps
We will continue monitoring the appeal and any related legislative or regulatory developments. Please stay tuned for updates and be prepared to renew compliance efforts without delay if the injunction is overturned.
This post builds on our prior insights and reflects the evolving legal environment surrounding the Corporate Transparency Act. Let us know if you need specific advice or wish to discuss the implications for your business.
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.
