Philip Stewart’s Post

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.

On December 3, 2024, the United States District Court for the Eastern District of Texas issued a nationwide preliminary injunction, enjoining the federal government from enforcing the Corporate Transparency Act (CTA) and the reporting requirements and regulations issued under the CTA. In an extensive opinion (79 pages) the court held that “the CTA appears likely unconstitutional. Accordingly, the CTA and its Implementing Regulations must be enjoined.” Corporate Transparency Act (CTA) Reporting. The CTA requires every “reporting company”* to file beneficial ownership reports with the Financial Crimes Enforcement Network (FinCEN) of the U.S. Treasury Department. If your company was formed before January 1, 2024, you must file your report before the end of 2024 (December 31, 2024). If your company was formed in 2024, you must file your report not later than 90-days after the date of formation. Companies formed after 2024 must file their report within 30-days after the date of formation. Please note that the court issued a preliminary injunction. The Court clarified that: “The 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. Thus, the Court determines that the Government should be enjoined from enforcing the Reporting Rule and the January 1, 2025, compliance deadline under the Reporting Rule should be stayed...” The preliminary injunction will not become a permanent injunction until and unless this Court determines at trial that the CTA and its reporting requirements are unconstitutional. Moreover, this preliminary injunction will be promptly appealed to the Fifth Circuit Court of Appeals who could issue a stay of this preliminary injunction. If they did so, the compliance deadline could be reinstated, or reestablished with a different date.  

On December 3, 2024, a Texas district court issued a nationwide preliminary injunction against the Corporate Transparency Act (CTA). This injunction means that Beneficial Ownership Information (BOI) reporting is no longer required, and noncompliance with the January 1, 2025, deadline cannot be enforced. There is uncertainty about whether this injunction will be overturned on appeal. Businesses should stay updated on legal and administrative developments, as further guidance could reinstate the reporting requirements. Background Congress passed the Corporate Transparency Act in 2021 with the intention of combating money-laundering, financing of terrorist activities, and tax evasion. It requires that specified business entities file reports detailing their owners, officers, and other control persons with Treasury’s Financial Crimes Enforcement Network (FinCEN). A September 2022 final rule implementing the act set the reporting deadline for most entities at January 1, 2025. The Corporate Transparency Act has faced push-back both in the courts and from lawmakers. Some contend that FinCEN has not adequately publicized the requirements or clarified reporting procedures. Others have raised constitutional concerns — including that the reporting requirements violate the First Amendment, constitute an illegal search or seizure under the Fourth Amendment, and exceed Congress’ powers. Two federal district courts have upheld the reporting requirements, while one has enjoined enforcement as to the named plaintiffs and their members only. The government has appealed that decision to the 11th U.S. Circuit Court of Appeals. In addition, several other lawsuits are still in the preliminary stages. Texas court decision On Tuesday, the U.S. District Court for the Eastern District of Texas ruled in favor of a group of six plaintiffs — including five entities and one individual —granting a preliminary injunction barring enforcement of the reporting requirements. The memorandum opinion, authored by Judge Amos L. Mazzant, indicates that the Corporate Transparency Act “is likely unconstitutional as outside of Congress’s power.” Make sure you stay updated about these changes by following us on social media channels.

Updates on Corporate Transparency Act (CTA) from Bob Jennings at TaxSpeaker. Alabama courts have been busy. On Friday March 1, 2024, the U.S. District Court for the District of Alabama declared the Corporate Transparency Act (CTA) unconstitutional. In the case of National Small Business Association v. Yellen (Case No. 5:22-cv-01448) [1], initiated by the National Small Business United, the challenge was against the CTA's mandate for small businesses to disclose their beneficial owners to the Financial Crimes Enforcement Network (FinCEN).   The ruling has the effect of suspending all BOI filing requirements for now, all enforcement actions, and all compliance concerns including questions of "practicing law without a license." Experts believe the ruling will be appealed, probably to the Supreme Court, so this is a temporary filing requirement suspension until a final appeal is exhausted. Voluntary filing appears to still be allowed if for some reason a client desires to file.

End of the Corporate Transparency Act? The good 11 month run has come to stop or it merely a pitstop? The federal court has issued a temporary stay on the enforcement of Beneficial Ownership Information Reporting (BOIR) requirements under the Corporate Transparency Act (CTA). This decision halts the immediate obligation of certain entities, known as Reporting Companies, to file information regarding their beneficial owners with the U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN). The BOIR rules, which were designed to enhance corporate transparency and prevent illicit financial activities, mandate businesses to disclose details about individuals with substantial ownership or control. However, legal challenges have led to the current suspension, leaving companies with two main options: File Voluntarily: Companies may continue to file their BOIR forms proactively to remain compliant in anticipation of future enforcement. Wait for Legal Resolution: Businesses can delay filing until there is greater clarity on the court's ruling and it's implications. FinCEN does not impose any penalties if there is a delay in filing or not filing the BOIR until the final decree from the federal court.

📢 Breaking News: Nationwide Injunction Suspends Corporate Transparency Act Enforcement On Dec. 3, 2024, the U.S. District Court for the Eastern District of Texas issued a nationwide preliminary injunction, temporarily halting enforcement of the Corporate Transparency Act (CTA) and its Beneficial Ownership Information Reporting Rule. This ruling pauses the requirement for reporting companies to disclose their beneficial ownership information (BOI) to FinCEN. The injunction applies across the U.S., suspending CTA filing obligations until further notice. Stay tuned for updates as the legal landscape evolves! #CorporateTransparency #LegalUpdate #CTA

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.

BOI Update Alert: Appeals Court Reinstates BOI Filing Requirement The 5th Circuit Court of Appeals has granted the government's emergency motion to stay a Texas district court's nationwide injunction against the Corporate Transparency Act (CTA). CTA requires nonexempt companies to report their beneficial owners. Before the Texas court's injunction, specified businesses formed prior to 2024 were required to file their initial beneficial ownership information (BOI) report with the Financial Crimes Enforcement Network (FinCEN) by Jan. 1, 2025, and new businesses were required to file within 30 days. The stay means the CTA is now in effect. The court found that the government is likely to succeed on appeal, that leaving the injunction in place could cause significant harm, and that the public interest in preventing financial crimes outweighs any harm to the plaintiffs. The case will proceed quickly to the next available oral argument panel. FinCEN has yet to issue a response to the 5th Circuit's order. In its budget discussions of last week, Congress did not extend the BOI compliance deadline for existing businesses to Jan. 1, 2026, so the original deadline of Jan. 1, 2025, remains in place. As a result, the 5th Circuit's decision has immediate implications for affected businesses. As we previously advised, it is best to file these reports as soon as possible given the few remaining days left before the Jan. 1, 2025, due date.

Major Development in Corporate Transparency Act (CTA) Enforcement A federal district court in Texas has issued a nationwide preliminary injunction halting enforcement of the Corporate Transparency Act (CTA), citing the law’s “likely unconstitutionality.” This ruling, issued just weeks before the January 1, 2025 reporting deadline for entities formed before 2024, contrasts with prior federal court decisions upholding the CTA’s constitutionality. The ruling highlights the ongoing legal uncertainty surrounding the CTA, which mandates reporting beneficial ownership information to combat financial crimes. Companies should consult legal counsel to determine whether to meet the filing deadline or await further developments. Read more about this significant decision:

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