Corporate Transparency Act Update

On December 3, 2024, in Texas Top Cop Shop v. Garland, the U.S. District Court for the Eastern District of Texas issued a preliminary injunction that purports to temporarily suspend the Corporate Transparency Act (“CTA”) and the enforcement of its provisions nationwide. This ruling affects all business entities that were gearing up to meet the FinCEN Beneficial Ownership Information (BOI) reporting requirements by the rapidly approaching deadline of January 1, 2025 (see our original alert on the CTA published June 11, 2024).

It is important to note that the injunction only impacts federal CTA obligations. State-specific transparency requirements, such as the New York LLC Transparency Act (which is expected to go into effect January 1, 2026), are unaffected by this ruling. Businesses should ensure compliance with all state-level mandates.

What Does This Mean for Your Business?

Suspension of Filing Deadlines: On its face, the ruling in Garland suspends the application of the CTA until a further court order is issued. Some questions may remain as to whether the Eastern District permissibly exercised its jurisdiction to enjoin the CTA nationwide. Given this uncertainty, and despite the apparent legal basis to conclude that all immediate filing deadlines under the CTA have been put on hold, it may be prudent to continue to comply with the CTA, which contains provisions for severe civil and criminal penalties for non-compliance. As of the date of this writing, the CTA filing portal appears operational.

Legal Proceedings in Play: The government is expected to appeal the decision. The outcome of this appeal may either reverse, extend, modify, or lift the injunction.

Recommendations for Businesses: Companies should continue to prepare for eventual compliance and should consider with their legal counsel whether interim compliance may be advisable. Regardless, gathering and maintaining up-to-date beneficial ownership information remains prudent, as the injunction could be lifted, requiring swift action to meet a reinstated deadline.

We are closely monitoring the situation as developments may happen requiring businesses to adapt accordingly. If you have questions or concerns regarding how these changes may affect your businesses, contact Jason Lederman at jlederman@steinadlerlaw.com or 917.639.5121.