"Federal Court Blocks Corporate Transparency Act."
On December 3, 2024, a federal court in Texas (Sherman Division) issued a preliminary injunction temporarily halting enforcement of the Corporate Transparency Act (“CTA”) across the United States.[1] This means companies are no longer required to meet the CTA’s upcoming January 1, 2025, reporting deadline for disclosing Beneficial Ownership Information (“BOI”).[2]
The court ruled that the law is likely unconstitutional and that enforcing it would cause irreparable harm to affected businesses. This decision stops federal regulators from imposing penalties for noncompliance while the injunction is in effect.
What Does This Mean for Your Business?
If your business is subject to the CTA—generally companies with $5 million or less in annual revenue and 20 or fewer employees—here’s what you need to know:
- No Immediate Action Required: The January 1, 2025, reporting deadline is currently suspended.
- No Penalties for Noncompliance: Regulators cannot enforce fines or other penalties for missing CTA-related deadlines during this period.
- Newly Formed Companies: Businesses created after January 1, 2024, are also not required to file BOI reports until further notice.
What Happens Next?
The government is expected to appeal this decision, which could lead to the injunction being overturned. Additionally, other federal courts have upheld the CTA, creating a split in how the law is viewed. For now, the Texas court’s ruling applies nationwide, but this could change if higher courts intervene.
While the CTA’s requirements are on hold, we recommend staying informed. Companies that might be subject to the law should review their ownership structures and prepare for the possibility that reporting obligations could resume in the future.
If you have questions about how this ruling impacts your business or need help navigating compliance with the CTA, please reach out to our team.
[1] Texas Top Cop Shop v Garland, et al., (E.D. TX, case 4:24-cv-00478, December 3, 2024)
[2] Note that in October a federal court in Virginia denied a similar request for preliminary injunction. Community Associations Institute, et. al., v. Janet Yellen, (E.D. VA case 1:24-cv-01957, October 24, 2024. Reporting companies located in Virginia should consult with counsel regarding whether they still have a duty to comply.