2 minute read | December.06.2024
A federal judge has blocked the U.S. government from enforcing the Corporate Transparency Act (CTA) and its implementing regulations nationwide.
As a result, companies affected by the CTA do not have to report information about their beneficial owners to the Financial Crimes Enforcement Network (FinCEN) – for now, at least.
A December 3 preliminary injunction from the U.S. District Court of the Eastern District of Texas concluded that the CTA and its regulations are likely unconstitutional. That halted enforcement of the law and its implementing regulations.
The ruling said U.S. and foreign reporting companies formed before 2024 do not need to comply with the CTA’s January 1, 2025 reporting deadline.
The ruling did not explicitly address other deadlines under the statute or regulations. However, because the court enjoined enforcement of the CTA and its regulations, we expect all filing deadlines are suspended, including for companies formed after January 1, 2024, and for updated reports.
Companies subject to the CTA’s reporting requirements do not have to file at this time.
If a government appeal succeeds, however, the CTA and its regulations will become enforceable again, and the deadlines will come back into effect (subject to any adjustments FinCEN may make).
Reporting companies should monitor developments and consult their CTA advisors to understand compliance requirements.
Companies that delay filing in light of the ruling may want to continue gathering information about their beneficial owners. That way, they will be ready to file in short order if needed.
The government has appealed the preliminary injunction and will likely seek a stay of the district court’s decision, which would allow the CTA’s enforcement pending appeal. To do that, look for the government to use all options, including emergency relief from the U.S. Supreme Court.
We expect FinCEN to clarify the impact of the court’s order soon, but it may take time to determine the CTA’s fate.