Preliminary Injunction of CTA and What it Means for Reporting Companies

On December 3, 2024 the United States District Court for the Eastern District of Texas granted a nationwide preliminary injunction, enjoining the enforcement of the Corporate Transparency Act (“CTA”) and staying its reporting deadline.

Congress passed the CTA in January of 2021, and it became effective on January 1, 2024. The CTA required companies deemed as “reporting companies” to report personal information about their beneficial owners to FinCEN, a bureau within the United States Department of the Treasury tasked with combatting money laundering, terrorist financing, and other financial crimes. All reporting companies that were in existence prior to January 1, 2024, had until January 1, 2025 to file their beneficial ownership information (“BOI”) reports.

However, in its recent decision the Court held that the CTA was likely unconstitutional and that “reporting companies need not comply with the CTA’s January 1, 2025, BOI reporting deadline pending further order of the Court.”

What Does This Mean For Reporting Companies?

Due to this nationwide injunction, reporting companies no longer have to file BOI reports…at least for now. The federal government has already appealed the preliminary injunction to the Fifth Circuit. If the Fifth Circuit upholds the preliminary injunction, the federal government could then seek emergency relief from the Supreme Court.

There will likely be some response from FinCEN over the next few days, providing more clarity and guidance to reporting companies. While companies do not have to file BOI reports as of now, it is important to note that this could change rather quickly. If the preliminary injunction is lifted, companies should be prepared to file BOI reports by the original deadline of January 1, 2025, although it is likely that FinCEN will announce an adjusted deadline. For now, reporting companies should stay alert to any further appeals or rulings.