Texas District Court Issues Stop of Corporate Transparency Act Compliance for all Businesses
Due to a court order effective nationwide and issued on December 3, 2024, currently there is no legal obligation to file Beneficial Ownership Information Reports to comply with the Corporate Transparency Act by year-end 2024.
GKH’s Corporate Practice Group has been monitoring several cases challenging the constitutionality of the Corporate Transparency Act (CTA). On December 3, the U.S. District Court for the Eastern District of Texas in the Fifth Circuit granted a nationwide preliminary injunction staying the U.S. Treasury’s Financial Crimes Enforcement Network’s (FinCEN) enforcement of the CTA. The case, Texas Top Cop Shop, Inc., et al. v. Garland, et al. (Case No. 4:24-cv-47), was brought by the National Federation of Independent Business (NFIB). Because each of its over 200,000 members was included as plaintiff, U.S. District Court Judge Mazzant applied the ruling to all businesses subject to the CTA (not just members of NFIB located in Texas).
With limited exceptions, the CTA required every small and medium-sized business to file a Beneficial Ownership Information Report (BOIR) with FinCEN regarding a company’s beneficial owners and those in substantial control by January 1, 2025.
There have been other challenges to the CTA by business groups, but rulings elsewhere only applied to particular members within those plaintiff groups. In contrast, the ruling in Texas Top Cop Shop, Inc. applies to all businesses subject to the CTA. While the Texas Court’s preliminary injunction is in place, FinCEN is prohibited from enforcing the BOIR requirements under the CTA, so consequently the January 1, 2025 deadline is paused pending a further order.
GKH and its Corporate Practice Group will continue to monitor further developments from the Texas Top Cop Shop, Inc. case and the outcome of any appeal. If you have questions about complying with the CTA, please contact a GKH Corporate Practice Group attorney.