2nd UPDATE 12/27/24- The Fifth Circuit Court of Appeals changes mind and keeps nationwide injunction on the CTA in place. To recap this complex situation, as reported in the below article, a lower court placed a preliminary injunction blocking the government from enforcing the CTA. The government appealed this decision to the Fifth Circuit Court of Appeals which initially lifted the injunction as we reported in the 1st update below. Now the Court has ordered the injunction back in place pending the official ruling on the appeal. This means that currently businesses do not need to comply with the CTA and make the beneficial ownership information reports. However, as noted below, this situation could change again. This is not a final ruling and the court is actively reviewing the appeal on this case.     

 

1st UPDATE 12/26/24- The Fifth Circuit Court of Appeals has overturned the injunction to the CTA reported on below. This means that small businesses will need to report their beneficial ownership information as required by the CTA. Given the short timeframe between this ruling and the original deadline of January 1st the court has extended the deadline to comply with the law. The new deadline to make these reports is January 13, 2024. for information on what is needed and how to report please see this article and this site https://fincen.gov/boi.  

 

A U.S. district court has issued an injunction blocking the enforcement of the Corporate Transparency Act (CTA) beneficial ownership reporting requirement. The CTA would have required the reporting of ownership information for most small business entities in the U.S. We previously discussed the upcoming deadlines and reporting requirement last year in this article. Reporting for existing businesses had gone into effect this year with a deadline of January 1, 2025, to make the initial report. Originally, failure to report or keep the information updated could subject businesses to substantial civil and criminal penalties. The court case is known as Texas Top Cop Shop, Inc. et al. v. Garland et al., and it is in the Eastern District of Texas. In granting the preliminary injunction, the court commented that the CTA was likely unconstitutional for Congress to pass. 
 

Does this initial injunction mean that businesses are off the hook for making these reports? Not necessarily: This is a preliminary injunction and the court case is still ongoing. Additionally, the U.S. Department of the Treasury has already filed an appeal to the Fifth Circuit challenging this injunction. So, it is possible that the injunction could be stayed or rescinded pending the outcome of the case. This could result in the reporting requirement coming back into effect. It may be prudent for affected businesses to have their CTA filing information prepared in case this were to happen. Also, businesses are allowed to voluntarily continue reporting if they so choose. However, while the injunction stands, businesses won’t need to take any particular action. They are not required to make the initial reports nor update already reported information. 
 

Since the injunction and its appeal occurred so recently and the original CTA deadline is fast approaching, it is possible that the situation could further change in the coming days. We will endeavor to update this article with changes as they occur. If you have questions or concerns regarding your business and any potential reporting requirements, you will want to discuss them with your legal counsel.