12/09/2024

CTA Compliance on Hold

CTA Compliance on Hold

Unexpectedly, 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 (CTA).   A group of six plaintiffs filed a lawsuit in May 2024 claiming that Congress exceeded its authority under the Constitution in passing the CTA.  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, so this protection applies to everyone.  The Court’s order states that neither the CTA nor the implementing rules adopted by FinCEN may be enforced and that reporting companies need not comply with the CTA’s upcoming January 1, 2025 deadline for filing Beneficial Ownership Information reports.  Here is a link to the lengthy order:  https://www.bloomberglaw.com/public/desktop/document/TexasTopCopShopIncetalvGarlandetalDocketNo424cv00478EDTexMay28202?doc_id=X3PI3GTJP5E9HSPN0JK6CAU8E8G

However, while this is good news, 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 in the case.  Unlikely, but theoretically something could happen before 1/1/25.  If this order is reversed (or the Government ultimately prevails) after 1/1/25, it is unclear what the status of reporting companies who have not complied by 1/1/25 would be, or if they would be granted additional time to come into compliance.  Also, the incoming Trump administration could take actions to “stop” the CTA if it so chooses after the January 20, 2025 inauguration.

If you have not already filed BOI reports for your entities, then you have some options:

• Go ahead and file anyway, by 1/1/25.
• Hold off on filing as you may never need to, and either file later this month (if still unclear) or wait and see what happens even after 1/1/25.

Filing the BOI reports is pretty easy (assuming you have a handle on who an entity’s “beneficial owners” are) so it's understandable if you just want to go ahead and file and not worry about this.

OMA Members: Please remember that your Membership includes your Legal Services Plan.  This plan allows you one free consultation up to 30 minutes per month via phone, email, or office conference with Legal Counsel.  To take advantage of this, please contact Auman Mahan & Furry’s Gary Auman at 937-223-6003.  This program is exclusive to current Members.