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December 6, 2024
by Ted W. Williams

This article provides an important update to the previous blog Navigating the Corporate Transparency Act: What Business Owners Need to Know.

Businesses across the country have been wondering how the Corporate Transparency Act (CTA) will impact their businesses and government reporting obligations. On December 3, 2024, a Federal District Court in Texas provided a much-needed reprieve from the CTA’s requirements. In Texas Top Cop Shop v. Garland et al., (E. Dist. TX 2024), the court issued a nationwide preliminary injunction against the enforcement of the CTA, reasoning that the CTA exceeds the federal government’s constitutional powers regarding the regulation of businesses (the traditional purview of the states). The Texas court’s decision appears to be a win for small businesses and federalism in general as critics have attacked the CTA due to the massive administrative burden the legislation and underlying regulations placed on small businesses.

Under this decision and the resulting injunction, businesses are currently exempt from any Beneficial Ownership Information (BOI) report filing requirements with the Department of Treasury’s Financial Crimes Enforcement Network (FinCEN). Previously, most businesses formed prior to 2024 were required to file a BOI report by January 1, 2025.

Looking forward, the federal government will likely appeal this decision to the US Court of Appeals for the 5th Circuit, with the possibility of a further appeal to the US Supreme Court. Businesses should monitor, and consult with counsel on, the status of any appeals in case the injunction is overturned.

There is speculation that the incoming Trump Administration and Republican Congress could repeal or amend the CTA as part of its goal of de-regulation, and the Texas court’s ruling could forecast a move in that direction. Legislatively, this could take the form of a total repeal of the CTA or an amendment to the scope of the CTA.

In practice, this update means that the January 1, 2025 deadline for filing a BOI report is no longer applicable. Businesses that have not already filed a BOI report with FinCEN are under no present obligation to do so. Those businesses should consult with legal counsel to determine whether they should still be prepared to file any BOI report in the future and what plans they should have in place should the injunction be lifted. Likewise, businesses that have already filed a BOI report with FinCEN should seek the advice of counsel to ensure that any information that was filed will be protected against potential misuse.

Ted Williams is an attorney with Flint, Connolly & Walker, LLP currently assisting clients in a variety of corporate matters including mergers and acquisitions, joint ventures, and financing arrangements, as well as numerous general corporate matters such as corporate governance, regulatory compliance, commercial contracts, and business formations.