Nationwide Injunction Temporarily Halts Enforcement of Corporate Transparency Act Reporting Rule

Nationwide Injunction Temporarily Halts Enforcement of Corporate Transparency Act Reporting Rule

On December 3, 2024, the U.S. District Court for the Eastern District of Texas issued a nationwide preliminary injunction that temporarily halts enforcement of the Corporate Transparency Act (CTA) and its related Beneficial Ownership Information (BOI) Reporting Rule.

This ruling pauses the requirement for businesses covered under the CTA to report beneficial ownership details to the Financial Crimes Enforcement Network (FinCEN).

Nationwide Impact of the Injunction

The injunction relieves all entities subject to CTA reporting obligations from filing requirements until further notice.

• Existing Companies (formed before 2024): The deadline to file initial BOI reports, previously set for January 1, 2025, is suspended.
• New Companies (formed in 2024): These businesses are no longer required to report BOI details within 90 days of their formation, as previously mandated.

Businesses Should Stay Informed Amid Uncertainty

Although the injunction temporarily suspends enforcement, businesses should remain vigilant. The ruling is preliminary and may be appealed, with the potential for reversal. If compliance requirements are reinstated, there is no guarantee deadlines will be adjusted to account for the pause.

It is anticipated that FinCEN will issue guidance or an official statement addressing the situation before year-end, providing further clarity for affected businesses.

Basis of the Court’s Decision

The decision to grant the injunction stemmed from concerns about the constitutionality of the CTA and its associated reporting rule. Judge Amos Mazzant, in a detailed opinion, questioned whether Congress has the authority to enforce such requirements, arguing that they may extend beyond constitutional limits. The ruling highlighted that the law regulates the mere existence of anonymous entities rather than their commercial activities.

Key outcomes of the injunction include:

• Suspension of the CTA’s enforcement under 31 U.S.C. § 5336.
• Halt to the implementation of the reporting rule, 31 C.F.R. 1010.380.
• A stay on all compliance deadlines.

The court emphasized the broad reach of the CTA, affecting millions of entities nationwide, and determined that the injunction should apply across the board to ensure meaningful relief.

Temporary Suspension, Not a Final Ruling

This decision does not constitute a final judgment on the CTA’s constitutionality but instead delays enforcement while the case moves forward. For now, businesses are not required to comply with the reporting deadlines under the CTA.