Federal Court Blocks Enforcement of Corporate Transparency Act Nationwide
On December 3, 2024, the U.S. District Court for the Eastern District of Texas issued a nationwide preliminary injunction in Texas Top Cop Shop, Inc., et al. v. Garland, et al., No. 4:24-CV-478 (E.D. Tex. filed Dec. 3, 2024), blocking the enforcement the Corporate Transparency Act (CTA). As noted in prior Client Alerts, the CTA requires certain business entities (Reporting Companies) to disclose information about their ownership and management to the federal government through a filing known as a “Beneficial Ownership Information Report” (BOI Report). For the vast majority of Reporting Companies, the deadline to file BOI Reports was set for January 1, 2025.
In an Opinion and Order spanning nearly eighty (80) pages, the Texas Top Cop Shop Court questioned the constitutionality of the CTA and held that neither the CTA nor its implementing regulations may be enforced. As a result, Reporting Companies are not required to submit BOI Reports by January 1, 2025 or any other date – at least not for the time being.
While this development is surely welcome news for business owners, it is important to note that the Court’s Order is in the form of a preliminary injunction and not a final decision. That means the Court could, in theory, reconsider its position on the matter. The more likely next step, however, is that the federal government will appeal the decision in Texas Top Cop Shop to the U.S. Court of Appeals for the Fifth Circuit and (potentially) the Supreme Court of the United States. In other words, the ultimate fate of the CTA has yet to be decided. For now, business owners can take comfort knowing they are not required to file a BOI Report.
As this case develops, it is important to stay informed about any changes or additional rulings. To that end, we will continue to monitor Texas Top Cop Shop and any other legal developments concerning the CTA. If and when the situation changes, we will issue a Client Alert with all relevant details. Until then, you are welcome to contact the attorneys at HRMM&L with any CTA-related questions.
This Client Alert is being provided for informational purposes only and is not intended and should not be construed as legal advice.