FEDERAL COURT ISSUES NATIONWIDE INJUNCTION AGAINST ENFORCEMENT OF THE CTA

By Joe Garza, Jr.

Last year we blogged about compliance with the Corporate Transparency Act and in addition, our firm's attorneys made individual client informational outreach to comply with the CTA.

The Corporate Transparency Act (CTA)

The CTA was created as a rider to the Jan 1, 2021, Defense Authorization Act and it creates a national beneficial ownership directory. If you own or control one of the affected entities, the entity is required to file a report with the Financial Crimes and Enforcement Network (FinCEN). The CTA was created to fight terrorism, fraud, corruption, and anonymous entities. The CTA is Effective January 1, 2024. It is estimated that 46 million entities in the US will have to report to FinCEN.

The Court’s Ruling

On December 3, 2023, the US District Court for the Eastern District of Texas (Sherman Division) granted a preliminary injunction in the case styled Texas Top Shop Cop, Inc. et. al. v. Merrick Garland, Attorney General of the United States, et. al. Civil Action No. 4:24-CV478. In the 79-page opinion, Judge Amos Mazzant ruled that the CTA was likely unconstitutional and issued a preliminary nationwide injunction enjoining the Act (CTA), the Reporting Rule: 21 U.S.C § 5336 (applying to Existing Reporting Companies and New Reporting Companies created this year) and the compliance deadline for the Existing Reporting Companies: December 31, 2024.

While we expect this ruling to be appealed, for the time being we recommend not filing beneficial owner reports until the final court rulings on this matter are rendered.

If you have any questions, you may contact your primary Fulton Jeang Attorney or the author, Joe Garza, Jr.