On December 3, 2024, a federal district court in Texas issued a nationwide preliminary injunction enjoining the government from enforcing the Corporate Transparency Act (CTA) and the Treasury Department regulations implementing the CTA. As we outlined in previous Client Alerts, the CTA requires most business entities to file reports disclosing their beneficial owners and control persons with the Financial Crimes Enforcement Network (FinCEN). A large number of covered companies that were formed prior to 2024 would, absent this injunction, need to file an initial Beneficial Ownership Report (BOR) by January 1, 2025.
The plaintiffs in this case raised a number of constitutional issues with the CTA, which the court found satisfied the requirements for a preliminary injunction, including that the plaintiffs showed a “substantial likelihood of success on the merits” if the case goes on to trial.
As a result of this ruling, for the moment, covered companies will not need to file a BOR by January 1, 2025, but may be required to comply at a later date, depending on the interim and ultimate results of the litigation. In addition, the incoming administration could take a variety of steps to limit or eliminate enforcement of the CTA.
Companies that have not yet filed a BOR may wish to pause such filings while monitoring the status of this case and developments in the CTA compliance requirements. To be safe, companies should be prepared to file a BOR, potentially on short notice, which means analyzing the company’s structure and ownership and control features to determine whether a filing will be necessary and, if so, what information will be required if/when a filing becomes due.
To read the full decision, please click here.
