Corporate Transparency Act Beneficial Owner Information Filing Requirement Enjoined Nationwide

We have been reporting on the Corporate Transparency Act (“CTA”), the related Beneficial Ownership Report regulations at 31 C.F.R. 1010.380 (the “BOI Regulations”) and their legal implications all year. While at least one court had enjoined its enforcement as to a specific group of plaintiffs, its vast filing requirements remained largely in effect for most businesses, until now.

Judge Mazzant in the United States District Court for the Eastern District of Texas just handed down his Memorandum Opinion and Order in Texas Top Cop Shop, Inc., et al. v. Garland, et al., Case No. 4:24-cv-478. His feeling about the CTA and its overreach were made apparent at the outset of his 79 page Opinion when he wrote “ ‘Great nations, like great men, should keep their word.’ Fed. Power Comm’n v. Tuscarora Indian Nation, 362 U.S. 99, 142 (1960) (Black, J., dissenting). Ours is a written Constitution. The promises it makes to the People and the States alike are not hidden. The Court must enforce them”.

In that Order, the Court found that the “CTA is likely unconstitutional as outside of Congress’s power.” It went on to say that “Enforcement of the [BOI Regulations] is also hereby enjoined, and the compliance deadline is stayed under § 705 of the APA. Neither may be enforced, and reporting companies need not comply with the CTA’s January 1, 2025, BOI reporting deadline pending further order of the Court.”

While we would like to report that this is a complete victory for businesses, unfortunately, the Texas opinion is only preliminary. As of this writing, FinCEN has not updated its website [https://www.fincen.gov/boi] to reflect the ruling. The government could appeal the ruling, and the injunction cannot be made permanent until after trial. Even then, the government could appeal that decision. Again, as of this writing, the BOI portal is still accepting registrations. Due to the vast number of businesses trying to comply with the January 1 deadline, the website has been experiencing filing delays. Businesses could proactively continue filing in case the injunction is overturned or wait to see how the decision plays out. If the injunction is dissolved, it may lead to a scramble to comply.