This Corporate Advisory provides a brief update on recent litigation regarding the Corporate Transparency Act (CTA) and its reporting requirements. It is not intended to, and does not, provide legal, compliance or other advice to any individual or entity. For a general summary of the CTA, please refer to our prior CTA Corporate Advisories from November 8, 2023, and September 17, 2024. Please reach out to your Katten attorney for assistance regarding the application of the CTA to your specific situation.
UPDATE: As of December 23, 2024, and until FinCEN issues updated guidance, the CTA reporting deadlines remain in effect (including January 1, 2025, for non-exempt Reporting Companies created prior to January 1, 2024).
The full opinion is available here.
Breaking News: Federal District Court Halts Corporate Transparency Act Enforcement Nationwide
On December 3, 2024, the US District Court for the Eastern District of Texas granted a nationwide preliminary injunction prohibiting the federal government from enforcing the CTA, its implementing regulations and its reporting deadlines. See Texas Top Cop Shop, Inc., et al. v. Garland, et al., Case No. 4:24-cv-478 (E.D. Tex.).
As a reminder, the CTA requires a Reporting Company to file a report with the US Treasury Department's Financial Crimes Enforcement Network (FinCEN), which contains specified information regarding itself and its beneficial owners. The CTA's implementing regulations provide that each Reporting Company must file its initial FinCEN report (a) by January 1, 2025, in the case of Reporting Companies formed or registered to do business prior to January 1, 2024, (b) within 90 days following formation or registration, in the case of Reporting Companies formed or registered to do business during 2024, and (c) within 30 days following formation or registration, in the case of Reporting Companies formed or registered to do business on or after January 1, 2025.
In the Texas Top Cop Shop case, the US District Court Judge Amos L. Mazzant issued a nationwide preliminary injunction preventing the enforcement of the CTA and its reporting requirements, including the compliance deadlines.
Many Reporting Companies who have not filed a FinCEN report to date are questioning the effect of the preliminary injunction. As of December 4, 2024, the CTA's reporting requirements are unenforceable. However, it is important to note that the preliminary injunction only temporarily enjoins enforcement of the CTA and is subject to appeal and further procedural developments. Whether and when an appeal may be filed, and the timing and outcome of an appeal, are all uncertain. Such developments may happen quickly or without advance notice, and any changes may or may not include an extension to the deadlines specified by the CTA. FinCEN has not yet issued any related statement or guidance in the wake of this nationwide preliminary injunction. A Reporting Company with questions should seek legal counsel regarding CTA compliance. A Reporting Company also should consider any applicable confidentiality obligations if it chooses to file a FinCEN report while the preliminary injunction is in effect. Katten will continue to closely monitor legal developments regarding the CTA.
The full opinion is available here.
