On December 3, 2024, the U.S. District Court for the Eastern District of Texas granted a nationwide preliminary injunction that enjoins the federal government from enforcing the Corporate Transparency Act (the CTA).¹ The CTA, which became effective on January 1, 2024, requires that “reporting companies” doing business in the United States disclose information about their beneficial owners to the Financial Crimes Enforcement Network (FinCEN), a bureau of the U.S. Department of the Treasury.

The district court’s order states that neither the CTA nor the implementing rules adopted by FinCEN may be enforced while the injunction remains in place. The court also stayed the upcoming January 1, 2025 reporting deadline for reporting companies formed prior to January 1, 2024. The court’s order is a preliminary injunction, meaning it only temporarily pauses enforcement of the CTA pending an appeal or a final decision on the merits. Thus, the CTA’s reporting obligations could resume at any time if the injunction is overturned on appeal.

In granting the preliminary injunction, the district court reasoned that the CTA is likely unconstitutional and argued that the CTA appears to fall outside of the enumerated legislative powers granted to Congress in the U.S. Constitution. However, the court’s determination did not dispositively decide the CTA’s constitutionality—only that enforcement of the CTA should be enjoined pending the court’s final determination of the constitutionality. The government has filed a notice of appeal of the district court’s decision to the U.S. Court of Appeals for the Fifth Circuit and is seeking a stay of the injunction pending appeal. If the stay is granted, enforcement of the CTA and its corresponding filing deadlines could be reinstated during the pendency of the government’s appeal.

FinCEN has issued a statement confirming that it intends to comply with the preliminary injunction and clarifying that reporting companies are not currently required to file beneficial ownership information reports and are not subject to liability if they fail to do so while the injunction remains in effect.² Nevertheless, FinCEN stated that it will permit reporting companies to continue to voluntarily submit beneficial ownership information reports. FinCEN did not advise whether there will be a grace period for compliance if the injunction is overturned on appeal.

Given the uncertainty surrounding the outcome of this case, reporting companies who have yet to file their initial beneficial ownership information reports should be prepared to file on short notice in the event the preliminary injunction is overturned. Likewise, reporting companies that have already filed should continue to document any changes to information previously reported and should be ready to file updated or corrected reports relating to changes or developments that occur during the pendency of the preliminary injunction. Reporting companies may also choose to voluntarily file initial or updated reports at any time despite the preliminary injunction.

¹ Texas Top Cop Shop, Inc., et al. v. Garland, et al., No. 4:24-cv-478 (E.D. Tex.).
² FinCEN’s Beneficial Ownership Information Website