On December 3, 2024, the U.S. District Court for the Eastern District of Texas (via case Texas Top Cop Shop v. Garland et al. (E.D. Tex., No. 4:24-cv-00478) enjoined the Federal Government from enforcing the Corporate Transparency Act (CTA) and its beneficial ownership information reporting (BOIR) requirement. Plain English: The Court’s ruling puts a pause on the December 31 deadline.
The Court issued an opinion and order that:
- “The CTA is likely unconstitutional as outside of Congress’s power.”
- “… the CTA, 31 U.S.C. § 5336 is hereby enjoined. Enforcement of the Reporting Rule, 31 C.F.R. 1010.380 is also hereby enjoined, and the compliance deadline is stayed under § 705 of the [Administrative Procedure Act].”
- “… reporting companies need not comply with the CTA’s January 1, 2025, BOI reporting deadline pending further order of the Court.” (emphasis added.)
What happens next?
While the federal government is likely to appeal the Texas decision, the changes in leadership at the Department of Justice resulting from the incoming administration leaves the long-term status of the CTA uncertain.
What to do?
If you already filed the BOIR, no further action is necessary. As a reminder, the filings are confidential.
For those who have not filed, given the approaching December 31 deadline, it may pose a risk to avoid reporting only to have to possibly revive efforts on a shorter timeline in a few weeks or months if this injunction is lifted. Many businesses will want to wait until they are certain filing will be necessary. So long as those businesses realize the potential necessity of filing quickly in the future and the uncertainty over any penalties for late filing, this isn’t an incorrect course either. It would be prudent (especially for complex ownership structures) to continue to do the work necessary to be able to file their BOIRs by January 1, 2025, in the event the injunction is lifted, overturned or narrowed before then.
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