DENVER – December 6, 2024
As of the date of this alert, the Corporate Transparency Act, including the applicable reporting rules and the January 1, 2025, reporting deadline, have been enjoined pursuant to a preliminary injunction that applies to all Reporting Companies (as defined below).
On December 3, 2024, the U.S. District Court for the Eastern District of Texas issued a nationwide preliminary injunction temporarily blocking the enforcement of the Corporate Transparency Act (the “CTA”), its implementing regulations and the associated reporting deadlines. As a result of the injunction, “Reporting Companies” (that is, companies that were under an obligation to file beneficial ownership information reports (“BOIRs”) with the U.S. Treasury Department’s Financial Crimes Enforcement Network (“FinCEN”) pursuant to the CTA and its implementing regulations) need not comply with the CTA while such injunction is in effect. However, the injunction is only temporary and could be lifted or stayed at any time, thus reviving Reporting Companies’ reporting obligations.
Key Points:
- Immediate Impact of the Decision: The court enjoined enforcement of the CTA in its entirety, including FinCEN’s implementing regulations and the January 1, 2025, reporting deadline applicable to reporting companies formed prior to January 1, 2024. As a result, Reporting Companies are not required to submit BOIRs until the court’s decision is overturned or the preliminary injunction is lifted or stayed. For Reporting Companies that have already filed BOIRs with FinCEN, no action is required at this time.
- Temporary Relief: The preliminary injunction is based on the district court’s finding that federal enforcement of the CTA is “likely unconstitutional.” However, a determination has not been made that the CTA is unconstitutional. The injunction is therefore temporary in nature and is not the final say on constitutionality. The United States government filed an appeal on December 6, 2024. Should the injunction be lifted or the order reversed, Reporting Companies may have to make BOIR filings on short notice.
- Actionable Steps for Reporting Companies: Reporting Companies should monitor the status of the injunction and remain in frequent contact with their advisors as to the status of the injunction and the CTA generally. We advise Reporting Companies to continue gathering necessary information for their BOIRs to be able to file on short notice if the injunction were to be lifted or the order reversed.
At the time of this publication, FinCEN has not announced how it plans to handle the injunction. Therefore, Reporting Companies should also stay informed about FinCEN updates in conjunction with the progress of the pending appeal of the injunction and other potential CTA-related court rulings.
If you have questions about your reporting obligations or the temporary preliminary injunction, please reach out to your Davis Graham attorney.
For more information on the CTA’s reporting requirements, please refer to Davis Graham’s past CTA legal alerts:
- The Corporate Transparency Act – Basics That Every Business Formed or Registered in the U.S. Needs to Know
- Corporate Transparency Act – Reporting Deadline (January 1, 2025) for Established Reporting Companies Approaching
Please contact Nathan Goergen, Sheila Forjuoh, or Erin Mooney with any questions.