by Ellen M. Long & Michael J. Radin

In a December 3, 2024, decision in the case of Texas Top Cop Shop, Inc. et al. v. Garland, the U.S. District Court for the Eastern District of Texas issued a nationwide preliminary injunction against the federal government’s enforcement of the Corporate Transparency Act (CTA). The Court found that the CTA is “likely unconstitutional,” and therefore unenforceable.

Consequently, the Court issued a broad order that the CTA beneficial ownership reporting requirement is enjoined and the compliance deadline of January 1, 2025, is stayed. This trial court order has the effect that entities that are deemed “reporting companies” under the CTA do not currently have an obligation to report their beneficial ownership.

It is important to note that the preliminary injunction is subject to change. The US government may appeal the decision. If the government successfully appeals the decision on an expedited basis, the injunction could be stayed (i.e., lifted) prior to the end of 2024. If that happens, reporting companies may be held accountable to adhere the original January 1, 2025, reporting deadline. The government has not yet issued any statement on a potential appeal, so we simply do not have a clear view of what will happen over the next few weeks.

Major Implications of the Decision

• The reporting requirement is enjoined. This means that the CTA’s beneficial ownership reporting requirement cannot legally be enforced against reporting companies at this time.
• The reporting deadline has been stayed. This means that for now the reporting deadline of January 1, 2025 (for reporting companies formed before January 1, 2024) cannot be enforced. It also means that the reporting deadline of 90 days after the formation of a reporting company formed after January 1, 2024, cannot be enforced at this time.
• The government may appeal. If appealed by the US government, the preliminary injunction could be stayed or remain in place. But if the preliminary injunction remains in place, reporting companies do not have a legal obligation to report.

Our Advice Moving Forward

• If you have not yet filed on behalf of your reporting company, you should - at a minimum - gather the information needed to prepare your reporting company’s Beneficial Ownership Information Report and be ready to submit it by the January 1, 2025, deadline.
• Continue to monitor the status of the case and be ready to file the report by the original deadline - just in case.
• If you wish to go ahead and complete the reporting requirement, the online portal for reporting beneficial ownership (and changes to beneficial ownership) remains open.

We understand that this decision may raise questions or concerns. Our team is here to provide you with the support and guidance you need. We will continue to monitor the case and post updates as necessary.