Legal Alert: Corporate Transparency Act PUT ON HOLD!

This week, the U.S. District Court for the Eastern District of Texas issued a new opinion in Texas Top Cop Shop v. Garland et al. (Case No. 4:24-cv-00478, December 3, 2024), finding that the Corporate Transparency Act (CTA) “is not justified by the Commerce Clause nor the Necessary and Proper Clause” and concluded that the plaintiffs had established a substantial likelihood of success on the merits in their argument that the CTA is unconstitutional. On that basis, the court issued a national preliminary injunction against the enforcement of the CTA.

While an appeal of the decision is likely, the ultimate outcome remains uncertain. Due to the injunction, enforcement of the CTA has been stayed. As such, no Beneficial Ownership Information Reports must be filed until the injunction is lifted (if ever).

Business owners who have previously filed under the CTA should continue to monitor the evolving legal situation to determine if further action is required.

For businesses that have not yet filed (and would otherwise be required to file under the CTA), it should be noted that while the Texas court has ruled that “reporting companies need not comply with the CTA’s January 1, 2025 deadline” pending further order of the court, it is not immediately clear how the filing deadlines under the CTA will be affected if the CTA is reinstated.

If the injunction is overturned on appeal, businesses will need to act quickly to meet the filing deadlines under the CTA. More information about the CTA’s requirements and deadlines (absent an injunction) is available here. Some businesses may take a “wait and see” approach to CTA compliance now that the injunction is in place, while others may wish to proceed with their CTA compliance efforts to avoid a rush (or potentially a late filing) if the injunction is lifted.

If you have questions about how the injunction or the CTA will affect your business, please contact Tim Forsman or Chris Raddatz in the Corporate & Finance Practice Group at Gammage & Burnham.