Texas District Court Enjoins Federal Government From Enforcing Corporate Transparency Act
On December 3, 2024, in Texas Top Cop Shop v. Garland et al. the U.S. District Court for the Eastern District of Texas issued a nationwide preliminary injunction against enforcement of the Corporate Transparency Act (the “CTA”), a federal anti-money laundering law that requires private companies to report their beneficial ownership information to the Financial Crimes Enforcement Network (FinCEN) by December 31, 2024.[1] The court ruled that the CTA and its implementing rules are “likely unconstitutional as outside of Congress’s power.”[2]
As a result of the preliminary injunction, companies that would otherwise be required to report to FinCEN are excused from doing so until further notice. The CTA applies to over 30 million companies (domestic and foreign) doing business in the United States, while FinCEN estimates that over 26 million companies have not yet filed reports. Although far reaching, the ruling by the Texas court is not final. It could be appealed by FinCEN and the preliminary injunction stayed while the appeal is pending, in which case companies might be expected to resume compliance with the CTA. FinCEN has taken such an approach with another challenge to the CTA in NSBU v. Yellen.[3]
Even if the preliminary injunction were to become permanent, it would not affect similar reporting obligations under state laws, such as the New York LLC Transparency Act, which goes into effect on January 1, 2026.
PierFerd will continue observing developments regarding the CTA. For additional information, please contact Ahpaly Coradin at ahpaly.coradin@pierferd.com or your regular PierFerd contact for assistance.
This publication and/or any linked publications herein do not constitute legal, accounting, or other professional advice or opinions on specific facts or matters and, accordingly, the author(s) and PierFerd assume no liability whatsoever in connection with its use. Pursuant to applicable rules of professional conduct, this publication may constitute Attorney Advertising. © 2024 Pierson Ferdinand LLP.
[1] For more information on the CTA, see our previous client alerts The Corporate Transparency Act: Implications and Challenges for Foreign Companies and Foreign Owners — Pierson Ferdinand LLP and The Corporate Transparency Act: Implications and Challenges for US Companies and Owners — Pierson Ferdinand LLP
[2] cta-v-garland-district-court-opinion-preliminary-injunction.pdf at p. 79.
[3] No. 5:22-cv-01448 (N.D. Ala.)
