On December 3, 2024, the U.S. District Court for the Eastern District of Texas issued a preliminary injunction blocking the U.S. Department of Treasury from enforcing the Corporate Transparency Act (CTA) anywhere in the country.

The court’s decision in Texas Top Cop Shop, Inc., et al. v. Garland, et al., a lawsuit filed by the National Federation of Independent Business (NFIB), concluded that the CTA was likely unconstitutional. This holding follows an Alabama decision from earlier this year that also found the CTA unconstitutional. In the Alabama case, FinCEN followed up with a notice clarifying that the court’s order applied only to the specific plaintiffs in that litigation. Here, the court enjoined the CTA’s enforcement nationwide, specifically stating that neither the CTA nor its related regulations may be enforced, and that “reporting companies need not comply with the CTA’s January 1, 2025, BOI reporting deadline[.]”

The practical effect of this injunction is that the federal government is enjoined from requiring compliance with the CTA until further legal determinations are made regarding the constitutionality and implementation of this injunction. However, the court’s decision will probably not be the final word on the CTA’s enforceability. Note this is only a preliminary injunction, based on the court’s determination of a likelihood of unconstitutionality. The usual next step would be a summary judgment hearing to determine the constitutionality of the statute. Alternatively, although no public announcement has been made, it is possible that the government will appeal the decision and seek a stay from the United States Court of Appeals for the Fifth Circuit. Ultimately, the case could be taken to the United States Supreme Court.

For now, while companies do not need to file reports under the CTA, it may be prudent to continue to evaluate the applicability of the CTA and, if not exempt from reporting, to gather the necessary beneficial ownership information so that reporting companies will be prepared to submit reports in the future if the injunction is stayed, lifted or modified. Alternatively, at this time, reporting companies are still permitted to proceed with filings if they choose to do so (for example, to avoid year-end timing issues if the preliminary injunction is lifted or to avoid uncertainty around the 90-day filing deadline).

Dentons is here to help clients navigate the CTA. If you have any questions about the CTA or this Client Alert, please contact your Dentons attorney or any member of the CTA Team listed below.

For more information contact:

Michael A. Bamberger
Todd Carlisle
Adam H. Dunst
Michael Gilmer
Tyler K. Keenan
Stephen S. Kudenholdt
Christopher J. Kula
Jeffrey S. Marcus
Jeffrey A. McKenzie
Felix Mehler
Robert B. Olin
Lauris G.L. Rall
Russell K. Smith
Toni Weinstein