On December 3, 2024, U.S. District Judge Amos Mazzant from the Eastern District of Texas, in the matter of Tex. Top Cop Shop, Inc. v. Garland, issued a preliminary injunction, suspending the Corporate Transparency Act (CTA) and the beneficial ownership information (BOI) reporting rule that issued by the Financial Crimes Enforcement Network (FinCEN).
The Court ruled that "the CTA, 31 U.S.C. § 5336," and the "[e]nforcement of the [BOI] Reporting Rule, 31 C.F.R. 1010.380" are enjoined; "the compliance deadline is stayed . . ."; "[n]either [the CTA nor the BOI Reporting Rule] may be enforced"; and that "reporting companies need not comply with the CTA’s January 1, 2025, BOI reporting deadline pending further order of the Court."
What is the CTA?
The CTA was enacted in 2021 as part of the National Defense Authorization Act, and its goal was to prevent money laundering, tax fraud, terrorism financing, and other financial crimes by requiring companies to disclose information about their owners. The CTA law requires certain businesses to disclose information about their beneficial owners and company applicants to FinCEN. Prior to the injunction, the filing deadline was January 1, 2025.
What is Next?
The Court was careful to specify it had not addressed the "issue of the CTA's constitutionality as applied to these Plaintiffs or Plaintiffs' challenges under the First and Fourth Amendments", only finding that the "CTA is likely unconstitutional as outside of Congress's power."
The question remains whether the Department of Justice will appeal the preliminary injunction to the Court of Appeals for the Fifth Circuit. Additionally, the incoming administration could direct the Treasury Department and FinCEN to review the regulations of the CTA. Agencies could delay enforcement by revising or repealing these rules, a process that would require notice-and-comment rulemaking under the Administrative Procedure Act. The incoming administration could also work to repeal or amend the CTA.
Between now and December 31, 2024, reporting companies should monitor developments regarding this case. If you, as a business owner, would like to know how you may be impacted by the future of the CTA, please feel free to contact Sean Barrick (sbarrick@setlifflaw.com) at (804) 377-1276 or Steve Setliff (ssetliff@setlifflaw.com) at (804) 377-1261.
© 2025 Setliff Law, P.C.| View Our Disclaimer | Privacy Policy