Federal Court in Texas Blocks Implementation of the Corporate Transparency Act

On Tuesday, December 3, 2024, Judge Amos L. Mazzant III of the U.S. District Court for the Eastern District of Texas issued a preliminary injunction in a case entitled Texas Top Cop Shop, Inc. v. Garland, enjoining the government from enforcement of the Corporate Transparency Act (“CTA”) nationwide.

Judge Mazzant held that the CTA and its implementing regulations are likely unconstitutional as exceeding Congress’s authority, and that requiring reporting companies to comply with the CTA poses a significant risk to their constitutional rights. Finding that the CTA threatens irreparable harm to the plaintiffs, the Court issued a nationwide preliminary injunction against the CTA and its regulations and stayed all related compliance deadlines “pending further order of the Court.”

As a result of the injunction, reporting companies formed before January 1, 2024 are not currently required to file Beneficial Ownership Information Reports (“BOIRs”) by January 1, 2025, and reporting companies formed during 2024 are similarly not required to file BOIRs within 90 days of their formation.

However, the government is expected to appeal this decision and seek a stay of the injunction. Court action could come quickly which could have the effect of reinstating all deadlines, including the January 1, 2025 deadline for reporting companies formed before January 1, 2024, before the end of this year.

At this time, we recommend that entities that qualify as “reporting companies” under the CTA should continue preparing to file BOIRs to ensure compliance in the event the injunction is stayed or reversed. These preparations include determining the required beneficial ownership information and gathering reportable information, as filings may need to be submitted on short notice if the deadlines are reinstated.

Finally, this litigation involves the federal CTA only and does not implicate any similar state law analogs, such as New York LLC Transparency Act.

We are closely monitoring developments in this case and any related government guidance. Updates will be provided as the litigation evolves. 

Click here for the CTA Resources Page, which includes latest updates and TC's comprehensive memo on the CTA.