Corporate Transparency Act - Preliminary Injunction
On December 3, 2024, the U.S. District Court for the Eastern District of Texas (Sherman Division), issued a preliminary injunction (the “Preliminary Injunction”) in Texas Top Cop Shop, Inc., et al. v. Garland, et al., Case No. 4:24-cv-478 (E.D. Tex.) enjoining the application of the Corporate Transparency Act (the “CTA”), the federal law that came into effect on January 1, 2024. Background information on the CTA can be found in our previous letters to clients, available here and here. We recently sent our clients a reminder of the deadline for any entity that was created or registered before January 1, 2024, and which is not exempt from the reporting obligations under the CTA, to file its BOI report before the US Department of the Treasury’s Financial Crimes Enforcement Network (“FinCEN”) not later than December 31, 2024. We have also reminded our clients that entities formed in 2024 have a 90-day period from the date of registration to file the BOI report, which term is reduced to 30 days for entities formed from January 1, 2025 onwards.
The obligation to file a BOI report by the abovementioned deadlines is affected by the recent Preliminary Injunction. While the Court has not affirmatively found the CTA to be contrary to law or unconstitutional, it found the CTA to be likely unconstitutional and stated
[T]he CTA, 31 U.S.C. § 5336 is hereby enjoined. Enforcement of the Reporting Rule, 31 C.F.R. 1010.380 is also hereby enjoined, and the compliance deadline is stayed under § 705 of the APA. Neither may be enforced, and reporting companies need not comply with the CTA’s January 1, 2025, BOI reporting deadline pending further order of the Court (emphasis added).
Accordingly, FinCEN cannot enforce any penalties for failure to comply with the deadlines set forth in the CTA. In light of the Preliminary Injunction, entities may still opt to voluntarily file their BOI report or may refrain from filing such BOI report until there is further action from the courts or legislature. We will continue to provide updates to our clients on any developments in connection with the applicability of the CTA.
Please note that this letter is sent for informational purposes only and does not constitute legal advice.
If you have any questions regarding the CTA or this letter, please don’t hesitate in contacting our office at (281) 367-2222 or acasas@stibbsco.com.
