Update on the Corporate Transparency Act (CTA) Litigation and Reporting Requirements
The federal government's enforcement of the Corporate Transparency Act (CTA) and its beneficial ownership reporting requirements is on hold—for now. On December 3, 2024, the U.S. District Court for the Eastern District of Texas issued a nationwide preliminary injunction in Texas Top Cop Shop, Inc v. Garland, temporarily preventing the CTA's enforcement just weeks before the January 1, 2025, reporting deadline. However, the injunction is not final, and the legal landscape could shift quickly.
The Current Situation
While the preliminary injunction halts enforcement, the Financial Crimes Enforcement Network (FinCEN) has stated it will comply with the court order but will continue to accept voluntary submissions of beneficial ownership information (BOI). The federal government has already filed a notice of appeal and is likely to seek a stay of the injunction in the U.S. Court of Appeals for the Fifth Circuit, with potential escalation to the Supreme Court.
What Could Happen Next?
The Fifth Circuit could respond in several ways:
Stay the injunction entirely: The CTA becomes enforceable again nationwide.
Limit the injunction’s scope: Reporting obligations may revive for some entities but not all.
Decline to stay the injunction: The CTA remains unenforceable during the appeal process.
If a stay is granted, the CTA could become enforceable with little notice, requiring reporting companies to comply with the January 1, 2025, deadline or, for newly formed entities, the 90-day reporting window.
Recommendations for Clients
Although filing BOI reports is not currently required, we strongly recommend preparing for compliance. Clients should:
Gather ownership information.
Analyze and organize data needed for BOI reports.
Have reports ready to file in case the injunction is lifted.
The legal uncertainty means that entities should not delay preparation, as decisions from the courts may come quickly, leaving little time to comply.
Conclusion
The CTA's future remains uncertain, but proactive preparation will ensure compliance if reporting requirements are reinstated. If you need assistance navigating these developments or preparing BOI reports, Polaris Law, PLC is here to help. Give us a call at (616) 422-5291. Stay tuned for updates as this litigation continues to evolve.
