Hot Off the Press: Court Issues Reprieve to the CTA Compliance Deadline of January 1, 2025!

If you’re a regular reader of this blog, you know we’ve been posting about the Corporate Transparency Act (CTA) for a while. Our first post detailed what you needed to know all the way back in August of last year. A refresher, the CTA is a new federal rule that went into effect on January 1, 2024, with a compliance deadline (for companies formed prior to that date) of January 1, 2025. In our most recent CTA-related post a couple of months ago, we recommended that reporting companies might want to hold off on compliance until the fourth quarter of this year, just in case there were any changes to the CTA. Well, those changes are here!

On December 3, 2024 — just yesterday — the U.S. District Court for the Eastern District of Texas issued an order, in Texas Top Cop Shop, Inc. v. Garland, granting a nationwide preliminary injunction against enforcement of the CTA. The order specifically says that “reporting companies need not comply with the CTA’s January 1, 2025, BOI reporting deadline pending further order of the Court.” The Court’s ruling means that reporting companies are no longer required to comply with the CTA’s January 1, 2025, beneficial ownership information (BOI) reporting deadline, at least until further order from the Court.

While some procrastinators may welcome this development, I’m sure, like us, a lot of small businesses are wishing that a court hadn’t taken until just a few weeks before the reporting deadline to issue this order. A lot of businesses have already undertaken the effort to analyze and comply with their reporting obligations under the CTA, including using resources in the Lathrop GPM CTA Client Resource Center and our Six-Step Guide to BOI Reporting.

While constitutionality of the CTA has not been determined, as applied to the Plaintiffs or their challenges under the First and Fourth Amendments, it did state that the CTA is “likely unconstitutional” as it may exceed Congress’s constitutional authority. Because the Reporting Rule implements the CTA, the Court suggested that the rule could also be unconstitutional for similar reasons.

It seems this legal saga is far from over, and we’ll need to wait for the Court’s final ruling. In the meantime, we hope to hear from the Financial Crimes Enforcement Network (“FinCEN”) soon regarding the next steps. If the CTA is ultimately deemed constitutional and a permanent injunction is not put in place, companies would need to comply with the reporting obligations.

Stay tuned for updates!