A U.S. District Court has issued a nationwide preliminary injunction barring enforcement of the Corporate Transparency Act (CTA) and staying the January 1, 2025, compliance deadline.
On December 3, 2024, U.S. District Judge Amos Mazzant of the Eastern District of Texas turned the CTA and the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (“FinCEN”) Beneficial Ownership Information (“BOI”) Reporting Rule on their heads, issuing a preliminary injunction that:
- A Texas district court has enjoined the government from enforcing the CTA and the Reporting Rule.
- The nationwide injunction stays the Reporting Rule’s January 1, 2025, compliance deadline.
- The court held that “the CTA is likely unconstitutional as outside of Congress’s power.”
The Court’s reasoning for enjoining the CTA and FinCEN’s BOI Reporting Rule is that Congress’s powers, which are expressly defined in the U.S. Constitution, do not include a “federal police power to regulate all aspects of public life.” The Court disagreed with FinCEN that Congress had the power to enact the CTA under either the Constitution’s Commerce Clause or its Necessary and Proper Clause.
While the federal government is likely to appeal the court’s ruling, the change in leadership that will take place in January at the Department of Justice leaves the long-term status of such an appeal uncertain. It is our belief that FinCEN will publish some type of statement or other guidance addressing this recent court order. Accordingly, we are counseling clients to pause BOI filings and take a “wait-and-see” approach over the next few weeks (before January 1, 2025) and monitor the anticipated publication of a statement, order or interim rule from FinCEN that addresses in some fashion the Texas preliminary injunction. In the meantime, you should consider continuing your work in preparing your BOI to comply with the CTA and be prepared to file if the preliminary injunction is lifted.
Please also note that, even though this may be the end of the CTA at the federal level, several states have adopted, or are considering adopting, their own version of a transparency act which in many ways have and/or will mimic the CTA. We may see more states interested in pursuing such legislation if the CTA permanently ends. To the extent that you have already filed your BOI report with FinCEN, you are in good standing with FinCEN, and the reports that have been filed should put you in a strong position to comply with state regulations when/if they are adopted at the state level.
The Goosmann Law Firm will continue to monitor developments in this, and other cases involving the CTA and provide updates as they become available. Please reach out to any of the Goosmann CTA Teams with any questions.