More Information About the Corporate Transparency Act
Dec 13, 2024
In our November 6 Newsletter, we disseminated a reminder about the new legislation, the Corporate Transparency Act, 31 U.S.C. § 5336 (CTA), requiring companies doing business in the US to disclose information to
FinCEN about their beneficial owners. The CTA required the compliance of nearly all LLCs – including single-member U.S. LLCs – by January 1, 2025. Compliance could be costly in time and resources; and yet, a failure to comply would put entities at risk of stiff penalties.
Good news, however, has arrived!
Two days ago, on December 3, 2024, in a 79-page Opinion and Order, the U.S. District Court for the Eastern District issued a sweeping, nationwide, preliminary injunction, enjoining the implementation of the CTA and its associated regulations. See Texas Cop Shop, Inc., et al v. Garland et al, No. 4:2024cv00478 – Doc 30 (E.D. Tex. 2024). As a result, the need to comply with the January 1, 2025. deadline is stayed, alleviating companies of its arduous filing requirements as advised in our November Newsletter.
In Texas Top Cop Shop, a group of six plaintiffs challenged the CTA’s constitutionality, seeking a declaratory judgment that the CTA is unconstitutional and an injunction against its enforcement. The plaintiffs argued the CTA and its reporting rule intruded on states’ rights under the Ninth and Tenth Amendments; unlawfully compelled speech and burdened the right of association under the First Amendment; and violated the Fourth Amendment by compelling disclosure of private information.
In issuing a preliminary injunction, the Court concluded that the CTA was “likely unconstitutional” as beyond the power of Congress and that the government was unlikely to succeed with arguments to the contrary. As a result, “Neither may be enforced, and reporting companies need not comply with the CTA’s January 1, 2025 BOI (Beneficial Ownership Information) reporting deadline pending further order of the Court.”
In Summary
The District Court’s order obviates the need to comply with the previously announced notice requirements of the CTA. Nonetheless, stay tuned, as this ruling is not final and may be reversed either by the District Court itself or on appeal.
If you have any questions or would like additional information, please contact us. Also, as a reminder, we are available to advise and assist with all your business and real estate needs.
Contact Zand & Fine for seamless communication and trusted expertise in both business and real estate law. Learn more here.
Note: While our office does not handle the above filings directly, we can connect you with a company that does.
