On December 3, 2024, the Eastern District of Texas Federal Court issued a nationwide preliminary injunction against the Corporate Transparency Act (CTA) in the case of Texas Top Cop Shop v. Garland et al. This decision effectively suspends the enforcement of the CTA, which had mandated companies to report beneficial ownership information to FinCEN.
Judge Mazzant delivered a scathing critique of the CTA, asserting that it likely exceeds Congressional authority and infringes upon state jurisdiction over corporate regulation. The court highlighted the substantial financial burden on businesses, with compliance costs estimated to surpass $22 billion in the initial year alone.
When determining to issue the injunction, the court looked and weighed the following factors; (1) the substantial threat of irreparable harm; (2) likelihood of success on the merits; (3) balance of equities; and (4) scope of the injunction. After weighing those four factors, the court determined that the Plaintiffs met their burden of each element, and found the injunction to be necessary.
The injunction’s nationwide scope impacts an estimated 32.6 million businesses across the United States. As a consequence, all CTA filing deadlines have been suspended, including the January 1, 2025 deadline for existing entities, and the 90-day filing window for newly formed companies.
For entities that have already submitted filings to FinCEN, no further action is necessary at this juncture. Those who have yet to file are advised to postpone their submissions while remaining prepared for potential future compliance should the injunction be lifted. All affected businesses should closely monitor ongoing legal and administrative developments.
It’s crucial to note that if the injunction is overturned or modified on appeal, CTA enforcement could resume, and compliance requirements would be reinstated. Therefore, businesses should maintain readiness for potential future compliance while staying informed about developments in this case.
CGA Law Firm will continue to monitor developments in this case and will provide additional information as it comes available. If you have any questions regarding the CTA or the matters discussed herein, please do not hesitate to contact your CGA Law Firm attorney.
