CTA Update: Corporate Transparency Act Enforcement Halted Nationally

The United States District Court for the Eastern District of Texas has issued a nationwide preliminary injunction prohibiting – for now – the enforcement of the Corporate Transparency Act and its implementing rules and regulations (the “CTA”).

Writing for the court, Judge Amos L. Mazzant found that the CTA was unlikely to satisfy the test for a valid exercise of legislative power by Congress under either the Commerce Clause or the Necessary and Proper Clause of the U.S. Constitution.  Judge Mazzant also affirmed that the plaintiffs had satisfied the other elements necessary for a preliminary injunction, including likely irreparable harm in the form of compliance costs and the potential deprivation of Constitutional rights under the First and Fourth Amendments.

This decision prevents the government defendants, including the Attorney General, the Secretary of the Treasury, the Director of FinCEN and their respective departments, from enforcing the CTA pending any further order of the District Court or a successful appeal by one or more of the government defendants.  In contrast to a similar ruling earlier this year by an Alabama Federal District Court, Judge Mazzant expressly extended the injunction to all potential reporting companies under the CTA on a nationwide basis.

In light of the upcoming transition of Presidential administrations, shifting law enforcement priorities and conflicting decisions among federal district courts, it is unclear to what extent and how quickly the government may appeal, challenge or otherwise respond to this ruling.  The government defendants have 60 days to file an appeal.  However, it is also possible that FinCEN may opt to suspend the current CTA filing deadlines while this case and related litigation continue to play out in various U.S. District Courts and Courts of Appeals.

To repeat, companies are not currently required to submit beneficial ownership reports to FinCEN.  The government is enjoined from enforcing the CTA under Judge Mazzant’s ruling.  That said, 2024 may not be done with the CTA.  Miller Johnson’s CTA Task Force will be monitoring developments through the end of the year and into 2025.  If you have any questions or concerns about the CTA, we encourage you to consult with counsel and to stay prepared.  So, enjoy the holidays, but stay tuned!