by Kent A. Brasseale, II and Heather M. Lobermann
On December 3, 2024, in Texas Top Cop Shop v. Garland et al, the United States District Court for the Eastern District of Texas granted a nationwide preliminary injunction against enforcement under the Corporate Transparency Act (“CTA”) and stayed the requirements to report. For more information about the CTA, please see our previous blog at https://kddk.com/2024/01/25/corporate-transparency-act-what-your-business-needs-to-know/.
Before this preliminary injunction, which was issued prior to a trial on the merits of the case, over 36 million corporations, limited liability companies, and limited liability partnerships were required to submit information about their companies and the beneficial owners of said companies to the Financial Crimes Enforcement Network of the Department of the Treasury. For companies formed prior to 2024, this filing was set to be due on December 31, 2024.
What Does This Preliminary Injunction Mean for Businesses?
As of the time of this posting, the Department of Treasury has yet to comment or otherwise indicate the course of action it may take. Litigation of this case is yet to occur. As well, its decision may thereafter be appealed to the Fifth Circuit (or the U.S. Supreme Court), and in any of these scenarios, the decision could be reversed or the injunction modified in its scope, in which case businesses would need to comply with the CTA.
If and until this injunction is lifted, the Department of the Treasury is prevented from enforcing the CTA and its reporting requirements. Pending further action in this case, businesses that have not already filed under the CTA reporting rules may suspend filing.
As this matter continues to be litigated through the courts and the Department of the Treasury issues further guidance, the status of the CTA and its requirements will shift accordingly. For businesses that have not yet filed, we recommend continuing to prepare the necessary documentation for the business and its beneficial owners so that the filing may quickly be accomplished should the injunction be lifted and enforcement resume.
What Should You Do If You Already Filed?
For businesses that have already filed, there is nothing to do at this time. It is recommended that any further compliance efforts regarding any updates that would have been required under the CTA are paused, and that the status of the CTA is continually monitored as this issue continues to be litigated.
How Can You Stay Informed?
KDDK will continue to monitor the status of the CTA through the litigation process and any potential administrative developments that arise. As any substantive updates occur, KDDK will provide information on such subsequent updates.
If we can be of assistance with any questions you have regarding the CTA, please contact attorneys Heather Lobermann at hlobermann@kddk.com or Kent (“KAB”) Brasseale II at kbrasseale@kddk.com, or by phone at (812) 423-3183.
