The U.S. District Court for the Eastern District of Texas issued a nationwide preliminary injunction barring the U.S. government from enforcing the Corporate Transparency Act (“CTA”) on December 3, 2024. CTA requires many companies to submit information about themselves and their beneficial owners to the Financial Crimes Enforcement Network (FinCEN), a bureau within the US Department of Treasury. Reporting companies formed before January 1, 2024, have until the end of 2024 to file their initial beneficial ownership information (BOI) reports.
In Texas Top Cop Shop, Inc. v. Garland (Docket No. 4:24-CV-478), the court ruled that: (1) the plaintiffs (an individual, three small businesses, the Libertarian Party of Mississippi, and the National Federation of Independent Business (NFIB)) are likely to suffer irreparable harm in the absence of preliminary relief, (2) the plaintiffs have demonstrated a substantial likelihood of success in arguing that the CTA is unconstitutional, (3) the harm posed by the CTA outweighs any damage that the preliminary injunction may inflict on the government, and (4) injunctive relief would not harm the public interest.
The preliminary injunction was sought by the plaintiffs only on behalf of themselves and the NFIB’s approximately 300,000 members. However, the court determined that a nationwide ban on the CTA’s enforcement would be appropriate, as the NFIB’s membership extends across the country, and the plaintiffs could not receive meaningful relief without a nationwide preliminary injunction. Thus, under the court’s order, the CTA is enjoined entirely, as is the primary reporting rule (for BOI reporting) that was issued under it by FinCEN. The court’s order further bars enforcement of the January 1, 2025, BOI reporting deadline.
The government may decide to appeal this preliminary injunction to the US Court of Appeals for the Fifth Circuit and may also potentially seek an order staying the effect of this preliminary injunction pending the resolution of any such appeal.
The U.S. District Court for the Northern District of Alabama (“USDC”) held on March 1, 2024, in National Small Business United et al. v. Yellen et al., No. 5:22-cv-01448, Dkt. 51 (N.D. Ala. 2024 that the Corporate Transparency Act (“CTA”), which requires most reporting companies (corporations and LLCs) to file a beneficial ownership information report (“BOIR”) with the Financial Crimes Enforcement Network (“FinCEN”)—is unconstitutional. The court permanently enjoined the government from enforcing the CTA only as to the plaintiffs in the case. The court did not issue a nationwide injunction preventing the law from being enforced against other entities.
Call or text experienced Business Attorney Robert Friedman at 716-543-3764 for guidance and advice on properly starting your small business in New York, including LLCs and corporations.