The
United States District Court for the Eastern District of Texas has issued a
nationwide injunction that preliminarily blocks enforcement of the Corporate
Transparency Act (CTA) reporting requirement. In response, FinCEN has
also stated that “In light of a recent federal court order, reporting
companies are not currently required to file beneficial ownership information
with FinCEN and are not subject to liability if they fail to do so while the
order remains in force.”.
Judge
Amos L. Mazzant III of the US District Court for the Eastern District of Texas
issued an order granting a nationwide preliminary injunction that: (1) enjoins
the CTA, including enforcement of that statute and regulations implementing its
beneficial ownership information reporting requirements, and, specifically, (2) stays
all deadlines to comply with the CTA’s reporting requirements. The Department
of Justice, on behalf of the Department of the Treasury, filed a Notice of
Appeal on December 5, 2024.
The
Texas Court issued the injunction in the case of Texas Top Cop Shop, Inc.,
et al v Garland, et al, No 4:24-cv-00478, and other cases are pending
before courts across the country.
The
CTA required that an estimated 32.6 million existing business entities disclose
their beneficial owners to the Treasury Department’s Financial Crimes
Enforcement Network before 2025. While the intent of the reporting was intended
to identify anonymous shell companies and deter money laundering, and other
illicit activities, retractors have argued that the rules fall outside of
Congress’s powers to regulate interstate and foreign commerce.
While this injunction order is in place, reporting companies are not currently required to file their beneficial ownership information and will not be subject to liability if they fail to do so while the preliminary injunction remains in effect. Nevertheless, reporting companies may continue to voluntarily submit beneficial ownership information reports.
