On December 3, 2024, in Texas Top Cop Shop, Inc., et al. v. Garland, et al., No. 4:24-cv-00478 (E.D. Tex.), a federal district court in the Eastern District of Texas issued an order granting a nationwide preliminary injunction that (1) enjoins the Corporate Transparency Act (CTA), including enforcement of that statute and regulations implementing its beneficial ownership information (BOI) reporting requirements, and (2) stays all deadlines to comply with the CTA's reporting requirements. The Department of Justice, on behalf of the Department of the Treasury, filed a notice of appeal on December 5, 2024.
On December 9, 2024, FinCEN posted the following on its BOI website:
In light of a recent federal court order, reporting companies are not currently required to file beneficial ownership information with FinCEN and are not subject to liability if they fail to do so while the order remains in force. However, reporting companies may continue to voluntarily submit beneficial ownership information reports.
The Corporate Transparency Act (CTA) plays a vital role in protecting the U.S. and international financial systems, as well as people across the country, from illicit finance threats like terrorist financing, drug trafficking and money laundering. The CTA levels the playing field for tens of millions of law-abiding small businesses across the United States and makes it harder for bad actors to exploit loopholes in order to gain an unfair advantage. ...
Texas Top Cop Shop is only one of several cases in which plaintiffs have challenged the CTA that are pending before courts around the country. Several district courts have denied requests to enjoin the CTA, ruling in favor of the Department of the Treasury. The government continues to believe―consistent with the conclusions of the U.S. District Courts for the Eastern District of Virginia and the District of Oregon―that the CTA is constitutional.
While this litigation is ongoing, FinCEN will comply with the order issued by the U.S. District Court for the Eastern District of Texas for as long as it remains in effect. Therefore, reporting companies are not currently required to file their beneficial ownership information with FinCEN and will not be subject to liability if they fail to do so while the preliminary injunction remains in effect. Nevertheless, reporting companies may continue to submit beneficial ownership information reports voluntarily.
Thus, for the time being at least, reporting companies are not currently required to file their beneficial ownership information with FinCEN and will not be subject to liability if they fail to do so while the preliminary injunction remains in effect. However, reporting companies who rely on this stay and do not file a BOI report need to be vigilant in monitoring developments as the court cases proceed.
For further information on the Texas litigation, please review our December 5, 2024, Alert.
About Duane Morris
Duane Morris is actively monitoring developments regarding the CTA and issuing Alerts on the topic. Duane Morris will provide advice to clients regarding CTA compliance only when explicitly engaged to do so in writing.
For More Information
If you have any questions about this Alert, please contact Thomas R. Schmuhl, Jocelyn Margolin Borowsky, Joel N. Ephross, Bruce H. Jurist, Hope P. Krebs, Lee J. Potter Jr., any of the attorneys in our Corporate Transparency Act Group, the attorney in the firm with whom you are regularly in contact, or Michael A. Gillen or any of the professionals in the Tax Accounting Group.
Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer.
