Charles Read’s Post

December Update – Preliminary Injunction Against the Corporate Transparency Act On December 3, 2024, in the case of Texas Top Cop Shop, Inc. et al. vs. Garland, the U.S. District Court for the Eastern District of Texas issued a preliminary injunction which prevents the U.S. Treasury Department and its Financial Crimes Enforcement Network (FinCEN) from enforcing the Corporate Transparency Act (CTA) against all companies nationwide. Please note that this is not a decision on the merits of the case, but merely a ruling granting a preliminary injunction. While one other Federal District Court has held that the CTA is unconstitutional and cannot be enforced, three other Federal District Courts have held that the CTA is constitutional and may be enforced. On December 5, 2024, the U.S Treasury Department filed a notice of appeal to the Fifth Circuit Court of Appeals. Based on the current preliminary injunction, our recommendation is to suspend all CTA filing activity until the preliminary injunction is either overturned or stayed (suspended). In the event that the preliminary injunction is either overturned or stayed, it is not clear whether the December 31, 2024, filing deadline for companies formed before 2024, the 90 day filing deadline for companies formed during 2024, or the 30 day deadline for companies formed after 2024 will be extended. A notice issued by FinCEN confirms that companies are not required to file their CTA reports, and will not be subject to liability for failure to file, while the preliminary injunction remains in effect. If your company has already filed its CTA report with FinCEN, this preliminary injunction does not affect you. If your company has not yet filed its CTA report, we recommend that you continue to gather the information necessary to file in the event that the preliminary injunction is overturned or stayed. If you have any questions, please contact Edmund Kauntz at ekauntz@smdklaw.com or Nathaniel Tucker at ntucker@smdklaw.com or via telephone at 216-292-5807.

Federal District Court Halts Corporate Transparency Act Reporting Requirements. On December 3, 2024, the U.S. District Court for the Eastern District of Texas issued a nationwide preliminary injunction against the Corporate Transparency Act (CTA) and its implementing regulations. The CTA, effective January 1, 2024, requires certain entities to report beneficial ownership information (BOI) to the Financial Crimes Enforcement Network (FinCEN) to combat financial crimes like money laundering and tax fraud. The court ruled in favor of plaintiffs, including small businesses and the National Federation of Independent Business, who argued the CTA was unconstitutional. This ruling halts enforcement of the law, including the January 1, 2025, BOI reporting deadline for most entities. Employers should note that this injunction is temporary. The U.S. Department of Justice has filed appeals, including an emergency motion to lift the injunction. Organizations are advised to monitor developments closely and remain prepared to comply with the CTA’s reporting requirements if the injunction is overturned or a permanent ruling is not issued.

Firm’s Response to Injunction Against Enforcement of the Corporate Transparency Act On December 3, 2024, Judge Amos Mazzant of the U.S. District Court for the Eastern District of Texas issued an injunction that halted the enforcement of the Corporate Transparency Act (the “CTA), which required most businesses operating in the United States to disclose information about their beneficial owners (i.e., the people who control the company) to the Financial Crimes Enforcement Network (FinCEN). The plaintiffs contended that the Act infringed upon constitutional protections by permitting federal oversight of companies created under state law and requiring the disclosure of detailed personal information about their owners. On December 5, 2024, the Department of Justice, submitted a notice of appeal to the U.S. Court of Appeals for the Fifth Circuit, challenging the court’s opinion and order. The Financial Crimes Enforcement Network (“FinCEN”) has also issued new guidance to reporting companies on how this injunction affects their compliance with the CTA. FinCEN stated, in part, the following: In light of a recent federal court order, reporting companies are not currently required to file beneficial ownership information with FinCEN and are not subject to liability if they fail to do so while the order remains in force. However, reporting companies may continue to voluntarily submit beneficial ownership information reports. Note, the preliminary injunction may be vacated, narrowed, or otherwise modified in the near term. Therefore, despite FinCEN’s revised guidance, it is not yet clear whether any changes to the preliminary injunction would extend the required filing deadlines or grant relief to companies that pause CTA filings while the preliminary injunction is in effect. An outcome that provided no filing extensions or safe harbor seems unreasonable and unlikely; however, it remains possible. Therefore, the Firm recommends clients conform to filing requirements that existed prior to the ruling above. This is a cautious approach.

The Corporate Transparency Act and the Beneficial Ownership Reporting Requirements have been enjoined as unconstitutional. Many business owners, lawyers and CPAs have been working toward meeting a December 31, 2024 filing deadline to file beneficial ownership reports with the U.S. Department of Treasury's Financial Crimes Enforcement Network ("FinCEN") to detail the beneficial ownership of the equity of every entity organized prior to January 1, 2024. On December 3, 2024, in Texas Top Cop Shop, Inc., et al v. Merrick Garland, Attorney General of the United States, the United States District Court for the Eastern District of Texas issued a nationwide injunction against enforcement of the Corporate Transparency Act, the reporting rules adopted by the U.S. Department of Treasury, and the compliance deadline for filing beneficial ownership reports. In doing so, the court found the plaintiffs in the case demonstrated a likelihood that the Act and the rules implementing the Act are unconstitutional because the Act exceeded Congress's constitutional authority. We believe it is substantially likely that this decision will be appealed and may ultimately make its way to the U.S. Supreme Court. In the interim, whether the injunction is upheld or not, the rush to file beneficial ownership reports by the end of the year has been alleviated.

U.S. District Court (Texas) Enjoins Enforcement of the Corporate Transparency Act (ACT) On December 3, 2024, the U.S. District Court for the Eastern District of Texas granted a nationwide preliminary injunction that enjoins the federal government from enforcing the Corporate Transparency Act (the CTA). The CTA, which went into effect January 1, 2024, requires “reporting companies” in the United States to disclose information regarding their beneficial owners (i.e., the individuals who own or control a company), to the Treasury Department’s Financial Crimes Enforcement Network (FinCEN). A group of six (6) plaintiffs filed a lawsuit in May 2024 claiming that Congress exceeded its authority under the Constitution in passing the CTA. In the court’s 79-page order that was issued by United States District Judge, Amos L. Mazzant, the court found that the plaintiffs were likely to succeed on the merits of their claims and, although the plaintiffs sought a preliminary injunction on behalf of only themselves and their members, the Court issued a nationwide injunction instead. The court’s order states that neither the CTA nor the implementing rules adopted by FinCEN may be enforced, and that reporting companies do not have to comply with the CTA’s upcoming January 1, 2025 deadline for filing beneficial ownership reports. The Court’s order is a preliminary injunction only and not a final decision. The Court’s order temporarily pauses enforcement of the CTA on a nationwide basis, but enforcement could resume if the Court’s order is overturned on appeal or the Government ultimately prevails on the merits. Oberman Law Firm will continue to aggressively monitor developments in this case.

CORPORATE TRANSPARENCY ACT TEMPORARILY BLOCKED NATIONWIDE BY TEXAS COURT On December 3, 2024, the U.S. District Court for the Eastern District of Texas issued a nationwide preliminary injunction suspending the enforcement of the Corporate Transparency Act (CTA). ·     Law invalidated less than one month before reporting deadline ·     Court says CTA is not a proper exercise of Commerce Clause power ·     The CTA cannot be justified under the Necessary and Proper Clause ·     It is expected that the government will seek an expedited appeal of the decision and request a stay of the order of the federal district court. ·     If overturned by the U.S. Court of Appeals for the Fifth Circuit, pre-2024 Reporting Companies would still be required to file their BOI Report no later than Jan 1, 2025. WHAT YOU NEED TO KNOW: Although the nationwide preliminary injunction relieves the immediate obligation to file with FinCEN, it would be wise for non-exempt reporting entities that have not filed their report, to continue to prepare for the filing and gather the information and documents needed and be ready to send if ultimately required.  If either the Fifth Circuit or Supreme Court stay the district court’s order pending appeal, the Reporting Rule will become enforceable again, and the rule’s deadlines will become effective.    As of the time of this alert’s publication, The Financial Crimes Enforcement Network (FinCEN) is still accepting BOI reports and has not released a statement addressing its approach to the CTA’s enforcement, although a statement may be forthcoming. ZLG will continue to monitor this matter. THIS CLIENT ALERT IS A GENERAL UPDATE REGARDING THE CORPORATE TRANSPARENCY ACT (CTA) NATIONAWIDE BLOCK BY TEXAS COURT. IT, THEREFORE, IS NOT INTENDED TO BE, AND SHOULD NOT BE CONSTRUED AS, LEGAL ADVICE. https://lnkd.in/gZwn4a_S

Preliminary Injunction: Corporate Transparency Act We wanted to make you aware of a recent court decision regarding the Corporate Transparency Act. On Tuesday, December 3rd, the U.S. District Court for the Eastern District of Texas issued a nationwide preliminary injunction against the enforcement of the Corporate Transparency Act (CTA). The 2021 CTA required most LLCs, Corporations, Limited Partnerships, and Statutory Trusts to file a Beneficial Ownership Information Report (BOIR) by the end of this month (December 31, 2024) or face substantial penalties.  Last week’s injunction means that businesses are not currently required to comply with the CTA. The court’s ruling is authoritative, and the scope is nationwide; however, it is a preliminary injunction, and the results will depend on the outcome of the government’s appeal. If the injunction is overturned, businesses may need to act quickly to meet reporting deadlines. The Financial Crimes Enforcement Network (FinCEN) is still accepting reports at https://www.fincen.gov/boi; however, Protect Wealth Academy (PWA) will continue to monitor and inform its students on the ongoing reporting requirements of the CTA.  We will cover this and more at our next Summit February 3-5 Register Today!! https://lnkd.in/gDYhPsFM For more information about this important court decision and how it may affect your businesses: Court Case: Texas Top Cop Shop, Inc., et al. v. Garland, et al., E.D. Tex., Case No. 4:24-cv-00478-ALM Forbes Magazine: https://lnkd.in/gn499Zkd NFIB Website: https://lnkd.in/gs8i6RrY  PWA is an active member of the National Federation of Independent Business (NFIB), one of the plaintiffs in the case. We look forward to seeing you “virtually!”

TO all my lawyer friends on Linkedin. Looking for clarity on the recent injunction against the #BOI reporting requirement. Not on my wish list this Christmas if its likely to hold or be extended if the appeal is granted. Any thoughts from the informed peanut gallery? From my fact check question on Perplexity Q: Did a judge in Texas recently filing an injunction on BOI and does it nullify the need to file by January 1, 2025 for pre-existing businesses? A: Yes, a federal judge in Texas recently issued a nationwide preliminary injunction against the enforcement of the Corporate Transparency Act (CTA)[1][2][3]. On December 3, 2024, Judge Amos Mazzant of the U.S. District Court for the Eastern District of Texas granted this injunction, which temporarily suspends the requirement for reporting companies to file beneficial ownership information (BOI) reports with the Financial Crimes Enforcement Network (FinCEN)[1][4]. This injunction effectively suspends the obligation to file initial BOI reports by January 1, 2025, for companies created prior to 2024[1]. However, it's important to note that: 1. This is a preliminary injunction and is subject to change[3]. 2. An appeal is likely, and the injunction could be reversed or vacated on appeal[1]. 3. If compliance requirements are reinstated, there's no guarantee whether or how the prior reporting deadlines may be extended[1]. Given these uncertainties, businesses are advised to remain cautious and continue monitoring their reporting obligations[1]. Some experts suggest either submitting BOI reports by the January 1, 2025 deadline or at least preparing to file in case the injunction is lifted or overturned before then[4]. Citations: [1] https://lnkd.in/gPZ88sWZ [2] https://lnkd.in/grnm_G9b [3] https://lnkd.in/geWinyPs [4] https://lnkd.in/gJSnM4jT [5] https://lnkd.in/g9AXrFGk [6] https://lnkd.in/gMPBTbEh [7] https://lnkd.in/g2dNjmU2 [8] https://lnkd.in/g8k6ypCn [9] https://lnkd.in/gth389CC [10] https://lnkd.in/gBCdG3ef [11] https://lnkd.in/gfWuyNVB

Corporate Transparency Act temporarily enjoined nationwide Update to injunction described below: On December 7, 2024, the US Financial Crimes Enforcement Network (FinCEN) confirmed that reporting companies—i.e., companies that would be required to report their beneficial ownership information to FinCEN under the Corporate Transparency Act (CTA) and its implementing regulations—are not required to file beneficial ownership reports for as long as the current, nationwide injunction of the CTA remains in effect. Further, FinCEN noted that reporting companies will have no liability for failing to file required beneficial ownership reports during the pendency of the injunction. FinCEN will continue to accept beneficial ownership reports from reporting companies on a voluntary basis. December 3, 2024, the U.S. District Court for the Eastern District of Texas (Sherman Division) issued a preliminary injunction in favor of the plaintiffs in the case of Texas Top Cop Shop, Inc. et al. vs. Garland (U.S. Attorney General). In so ruling, "[t]he Court has determined that the CTA and Reporting Rule are likely unconstitutional for purposes of a preliminary injunction. It has not made an affirmative finding that the CTA and Reporting Rule are contrary to law or that they amount to a violation of the Constitution." The Court went further and ruled that this is a nationwide injunction, applying against enforcement of the CTA and its impending January 1, 2025 filing deadline.The Court stated: "…theCTA, 31 U.S.C. § 5336 is hereby enjoined. Enforcement of the Reporting Rule, 31 C.F.R. 1010.380 is also hereby enjoined, and the compliance deadline is stayed under § 705 of the APA. Neither may be enforced, and reporting companies need not comply with the CTA's January 1, 2025, BOI reporting deadline pending further order of the Court." Note this is a preliminary injunction, and reporting entities should pay close attention for additional updates and proceedings in this and other cases which could modify or change this order. A copy of the order is attached.

The Corporate Transparency Act (the “CTA”) is a federal law that went into effect January 1, 2024, and is aimed at preventing illegal financial activities by increasing transparency in business ownership. The CTA requires certain companies to disclose information about the company’s “beneficial owners” to the Financial Crimes Enforcement Network (“FinCEN”). A “beneficial owner” is anyone who, directly or indirectly, owns 25% or more of the company or who exercises significant control over it. In most instances, companies were required to report their beneficial ownership information to FinCEN no later than January 1, 2025 in order to avoid penalties. On December 3, 2024, the US District Court for the Eastern District of Texas granted a nationwide preliminary injunction stating, among other things, that reporting companies do not need to comply with the CTA’s January 1, 2025, reporting deadline for filing beneficial ownership information. Unless and until an appellate court overrules the injunction, no businesses are obligated to comply with the reporting requirements. WHAT THIS MEANS FOR YOU If You Have Already Filed Your CTA Information Report: No immediate action is required. You can be assured that you are in compliance with the CTA and its reporting obligations in case the injunction is overturned. If You Have Not Filed Your CTA Information Report: If you are in the process of gathering your ownership information, you may wish to continue and file your report in case the injunction is overturned. You may also withhold from filing but be prepared to file in the future on short notice.