The Corporate Transparency Act (CTA) was dealt a potentially fatal blow earlier this week, courtesy of the U.S. District Court for the Eastern District of Texas in Texas Top Cop Shop., Inc. v. Garland, et al (4:24-cv-00478-ALM). On December 3, 2024, the Court issued a preliminary injunction, effectively blocking the CTA from being enforced against any business owner nationwide. 

As with the cases discussed in our earlier post on this matter, plaintiffs in the Top Cop action questioned the constitutionality of the CTA, alleging here that the Act violates plaintiffs' rights under the First, Fourth, Ninth, and Tenth Amendments to the Constitution. The Eastern District did not decide whether the CTA violated those constitutional rights but granted the plaintiffs' request for a preliminary injunction, concluding that "the CTA is likely unconstitutional as outside of Congress's power." 

Accordingly, the court ruled that the CTA and any reporting requirements may not be enforced, and, accordingly, "reporting companies need not comply with the CTA's January 1, 2025, BOI reporting deadline pending further order of the Court."

As expected, the government promptly filed a notice of appeal with the Fifth Circuit Court of Appeals on December 5th. Upon reviewing the Court's order, the 5th Circuit will have several options for responding, including upholding the nationwide injunction, narrowing its scope, staying it, or lifting it entirely. 

Therefore, given the uncertainty of what's to come next with the CTA, while there is no current reporting requirement, reporting companies who have not yet filed are recommended to compile the necessary information and documents to be prepared to report, should the injunction be lifted or narrowed before January 1st. 

BOIR submissions can be made, and the most up-to-date information directly from FinCEN is available at FinCEN's BOI Filing System.