CTA Reporting Requirements Halted Nationwide
Kennedy Sutherland has previously reported on the Corporate Transparency Act (“CTA”) requirement that certain businesses report beneficial ownership information (“BOI”) to the Financial Crimes Enforcement Network (“FinCEN”). In that client alert, we notified you that all “reporting companies” (i.e. any entity that is formed in or registered to do business in the United States or Indian Tribe) that was formed or registered before January 1, 2024, was required to file the BOI report by January 1, 2025.
However, this reporting deadline was just halted. On December 3, 2024, a federal district judge in Texas issued a preliminary injunction that:
i. enjoins the CTA;
ii. enjoins enforcement of the BOI reporting rule;
iii. stays the January 1, 2025 compliance deadline imposed by the BOI reporting rule;
iv. orders that neither the CTA nor the BOI reporting rule may be enforced; and
v. declares that “reporting companies need not comply with the CTA’s January 1, 2025, BOI reporting deadline pending further order of the Court.”
This ruling is set forth in Texas Top Cop Shop, Inc. et al. v. Garland et al., No. 4:24-cv-478-ALM (E.D. Tex.; 12/24), a lawsuit filed by six plaintiffs challenging the constitutionality of the CTA and the BOI reporting rule requirements. In response to the plaintiff’s filing, the defendants, comprised of several United States representatives and the governmental entities that they serve, argued that the CTA is a valid extension of Congress’s powers under the Constitution. Specifically, the defendants argued that the CTA is authorized under the Commerce Clause and the Necessary and Proper Clause of the Constitution.
Judge Amos L. Mazzant of the U.S. District Court for the Eastern District of Texas granted the plaintiff’s motion for preliminary injunction on the basis that the CTA and BOI reporting rule are “likely unconstitutional for purposes of a preliminary injunction.”[1] Notably, Judge Mazzant added that the Court “has not made an affirmative finding that the CTA and Reporting Rule are contrary to law or that they amount to a violation of the Constitution.”[2] However, because of the likelihood that plaintiffs would be able to establish that they are, in fact, unconstitutional, the preliminary injunction was granted.
What does that mean for my entity?
The Court’s determination is that the injunction should apply nationwide, not just to the plaintiffs in the case. Therefore, all entities are currently excused from complying with the BOI reporting requirements.
However, this ruling is only a preliminary injunction and, as such, could be impacted or overturned by further proceedings. On December 5, 2025, the defendants in the case appealed the preliminary injunction to the U.S. Court of Appeals for the Fifth Circuit. If the preliminary injunction is invalidated in this appeal, the January 1, 2025 filing deadline will be reinstated and companies will be obligated to comply with the BOI reporting requirements. We will continue to monitor this ruling and the appeal and provide you with updates regarding the enforceability of the CTA and the requirements under the BOI reporting rule.
[1] Texas Top Cop Shop, Inc. et al. v. Garland et al., No. 4:24-cv-478-ALM (E.D. Tex.; 12/24) at 77.
[2] Id.