Important Corporate Transparency Act Update

December 5, 2024 Brian K. Fullmer Jeremy Jarrett Michael W. Margrave Steven M. Goldstein Business & Corporate Law

The firm has been closely monitoring developments with respect to the Corporate Transparency Act (the “CTA”), a statute recently passed by Congress which requires most closely held businesses to report their beneficial ownership to the Financial Crimes Enforcement Network or FinCEN. Under the statute, newly formed businesses have ninety (90) days after formation to report such information, and businesses in existence prior to 2024 have until January 1, 2025, to report.

On December 3, 2024 the U.S. District Court for the Eastern District of Texas issued a preliminary injunction in the case of Texas Cop Shop, Inc. v. Garland, blocking the enforcement of the CTA’s beneficial ownership reporting requirements as a likely unconstitutional overreach of Congressional authority. This nationwide injunction both ceases enforcement of the reporting requirements and, importantly, includes a stay on meeting the compliance deadline.

What does this mean for our business clients? Pending a decision on appeal from a higher court or a  reversal of the injunction at a later date, the preliminary injunction removes the requirement for both  new and existing businesses to comply with the CTA’s reporting obligations. We note that the injunction is preliminary, and the government may appeal, but at this time, the injunction remains in force, including the stay of any requirement to report for any existing entities by the deadline of January 1, 2025.

Sacks Tierney will continue to monitor the situation regarding the CTA as it continues to develop, and in the event status of the injunction changes, we will provide further communication and instruction. Should you have any questions or desire a copy of the order from the Texas court, please do not hesitate to reach out to any of the attorneys on our CTA team.

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