Nationwide Injunction on the Corporate Transparency Act-UPDATE
By: Jonathan D. Haile
The U.S. District Court for the Eastern District of Texas recently issued a preliminary injunction against the Corporate Transparency Act (CTA): This halts the enforcement of the CTA and having to file BOI by end of the year nationwide. Though not a permanent decision at this point, Reporting Companies under the CTA are not required at this time to file their Beneficial Owner Information (BOI) reports.
The Court found that the CTA substantially threatened Reporting Companies’ constitutional rights and could result in irreparable injury if found to be unconstitutional. The Court further stated that the CTA was likely unconstitutional, finding that it did not fall within any of Congress’s enumerated powers and therefore, Congress did not have the authority to pass the CTA. While the Court did acknowledge Reporting Companies’ worries over the regulatory burdens the CTA placed upon them and the potential violations of their free speech, it did not rule on those issues in its Order.
In short, what this means for businesses is that following the injunction, businesses previously considered “reporting companies” under the CTA are no longer required to submit their Beneficial Owner Information (BOI) to the Financial Crimes Enforcement Network (FinCEN) by the previous deadline of January 1, 2025. Instead, all reporting requirements are temporarily halted while the Court continues reviewing the legality of the CTA.
While the CTA has been paused for the time being, the Government has appealed this injunction, it is unclear at this time whether it will be overturned. If it is overturned, then Reporting Companies will be required to comply with the reporting requirements almost immediately. We recommend Reporting Companies make preparations to comply with the CTA in the event that the injunction is overturned. Simms Showers will continue to monitor the case and will provide updates as it develops.
Disclaimer: This memorandum is provided for general information purposes only and is not a substitute for legal advice particular to your situation. No recipients of this memo should act or refrain from acting solely on the basis of this memorandum without seeking professional legal counsel. Simms Showers LLP expressly disclaims all liability relating to actions taken or not taken based solely on the content of this memorandum.
