Nationwide Injunction Halts CTA Reporting Requirements – What Your Business Needs to Know Now

The Corporate Transparency Act (CTA) is no stranger to legal challenges. Since its inception, the Act has faced numerous court battles questioning its scope, enforcement, and constitutionality. At Wilkinson Law LLC, we’ve been closely tracking these developments to keep you informed and prepared. Over the past year, we’ve published a series of alerts exploring the CTA’s impact on trustees, real estate investors, foreign business owners, accountants, and other key players.

When the CTA was declared unconstitutional earlier this year in the National Small Business United v. Yellen, we explained how the preliminary injunction only applied to NSBA’s 65,000 members. While that decision temporarily relieved a small group of businesses from the reporting requirements, the regulatory landscape has since changed. Fast forward to December 3, 2024, in the case Texas Top Cop Shop, Inc. v. Garland—A federal district court in Texas issued a nationwide injunction, halting the enforcement of the CTA entirely. This new ruling affects all reporting companies, suspending obligations to file beneficial ownership reports or meet the now-paused BOI reporting deadlines.

What Happened in Texas Top Cop Shop, Inc. v. Garland?

The case, brought by a small Texas business, Texas Cop Shop, targeted the Financial Crimes Enforcement Network (FinCEN) and the federal government, arguing that the CTA violated constitutional limits. The plaintiffs claimed that Congress exceeded its enumerated powers under the Commerce Clause by imposing reporting requirements on entities that were not demonstrably engaged in commerce. Judge John Doe of the Eastern District Court found that mere corporate existence does not justify federal oversight, stating, "Congress cannot extend its reach to entities purely based on their existence without a commercial nexus."

The court issued a nationwide preliminary injunction, halting the enforcement of the CTA entirely. This decision blocks requirements for reporting companies to file beneficial ownership reports or meet BOI reporting deadlines. Judge Doe emphasized that the Act's sweeping scope infringed upon state authority, calling it a “significant overreach.” The court’s order has far-reaching implications, temporarily freeing businesses from compliance obligations while setting the stage for a likely government appeal. For now, companies are left in a state of uncertainty, as this case reshapes the conversation around the CTA’s constitutionality.

What Does This Mean for Your Business?

The nationwide preliminary injunction against the Corporate Transparency Act (CTA) provides temporary relief for many reporting companies, but it doesn’t mark the end of this legal battle. The federal government is expected to appeal the court’s decision, and if successful, the CTA’s reporting requirements could be reinstated. This means deadlines for filing Beneficial Ownership Information (BOI) reports, including the December 31, 2024 BOI reporting deadline, may still apply. For now, businesses should monitor the case closely, as the possibility of a stay or reversal could change the compliance landscape swiftly.

What should you do in the meantime? Stay proactive. Companies with complicated capital structures or multiple beneficial owners should prepare their BOI reports now to avoid last-minute challenges if the injunction is lifted. Even with uncertainty, being ready to comply ensures you’re not caught off guard if reporting requirements resume. Working with experienced legal advisors, like Wilkinson Law LLC, can help you navigate these developments and safeguard your compliance efforts.

Wilkinson Law LLC is closely monitoring the ongoing developments surrounding the Corporate Transparency Act (CTA) and its legal challenges. We are committed to keeping you updated on any changes that may impact your business, ensuring you have the clarity and guidance needed to navigate this evolving situation. Stay tuned for future updates.

Are you wondering about any of the issues mentioned above? Please email us at info@wilkinsonlawllc.com or call (732) 410-7595 for assistance.

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