Texas Court Issues Nationwide Injunction on Corporate Transparency Act

Yesterday afternoon, December 3, 2024, a United States district court in the Eastern District of Texas issued a preliminary injunction against enforcement of the Corporate Transparency Act (“CTA”), stating that the scope of its injunction is nationwide. The court’s order specifically stayed the FinCEN reporting deadline of January 1, 2025, for reporting companies formed or registered to do business in the U.S. before January 1, 2024. Texas Top Cop Shop, Inc. v. Garland, No. 4:24-cv-478 (E.D. Tex.).

As of this writing, there is nothing posted on the FinCEN website about the injunction and the FinCEN website appears to be continuing its acceptance of Beneficial Ownership Interest Reports. We believe the U.S. Department of Justice is likely to appeal the injunction in the coming days and may also ask the U.S. Court of Appeals for the Fifth Circuit (or, potentially, the U.S. Supreme Court) to grant an immediate stay of the injunction, or to narrow the application of the injunction to only the plaintiffs in the case and its member companies. While much remains unclear, what’s clear is that in the next several days we should have more information about the government’s response to the preliminary injunction than we have now.

At this point, we recommend that our clients continue their preparations for compliance with the CTA’s reporting requirements so that as the situation evolves over the next few weeks, clients will be in a position to complete their required filings on what may turn out to be a tight timeline. So much depends on whether a reviewing court upholds, modifies, or stays the preliminary injunction in the coming weeks and what the government says about how it will seek to enforce deadlines in light of the pending litigation.

We also suggest that clients consider the option of proceeding with their CTA filings despite the pending litigation, to avoid the need for ongoing monitoring and assessment of requirements that may be in flux for the foreseeable future.