Texas District Court Issues National Preliminary Injunction Blocking Beneficial Ownership Information Reporting Requirements Under the Corporate Transparency Act
On December 3, 2024, the U.S. District Court for the Eastern District of Texas issued a preliminary injunction in the case Texas Top Cop Shop, Inc., et al. v. Garland, et al., enjoining the U.S. Department of Treasury from enforcing the Beneficial Ownership Information (BOI) reporting requirements under the Corporate Transparency Act (CTA). This decision comes just weeks before the looming January 1, 2025 deadline for entities created before January 1, 2024 to comply with the CTA’s BOI reporting requirements.
In granting the Plaintiff’s motion for a preliminary injunction, the Court found that the CTA is likely unconstitutional, ruling that it falls outside the scope of Congress’ powers. As a result, the Court has temporarily blocked the CTA’s BOI reporting obligations, which require certain entities to disclose their beneficial ownership information to the Financial Crimes Enforcement Network (FinCEN).
The Court expressed concerns about the potentially negative impact of the CTA on small businesses, noting that “[f]or good reason, Plaintiffs fear this flanking, quasi-Orwellian statute and its implications on our dual system of government.” This statement highlights the Court’s concern that the CTA may infringe on the rights of business owners, particularly those with smaller, closely held entities.
It is important to note that this injunction is preliminary and not permanent. We believe further legal developments regarding the CTA will occur in the coming days and weeks, as we expect FinCEN to file an immediate, emergency appeal to either narrow or stay the preliminary injunction imposed by the Texas District Court.
If your business or entity was preparing to comply with the CTA’s BOI reporting requirements, this injunction temporarily halts those obligations. However, the situation remains fluid and the legal landscape could change depending on future rulings. Our Maynard Nexsen team will continue to monitor developments and provide updates as new information becomes available.
For now, entities that would have been required to file BOI reports under the CTA can delay compliance until further notice. Our Maynard Nexsen team stands ready to assist you in assessing how this decision might affect your business’s reporting obligations and will continue to stay informed on any future updates regarding the CTA.
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