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 So, it is possible that the injunction could be stayed or rescinded pending the outcome of the case.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.