On December 3, 2024, the United States District Court – Eastern District of Texas issued a preliminary injunction enjoining the federal government from enforcing the Corporate Transparency Act (“CTA”) and its Implementing Regulations. Unlike prior court orders challenging the validity of the CTA, the preliminary injunction issued by the Texas federal court is a nationwide ban on the enforcement of the CTA. According to the Court’s Order, the “CTA… is hereby enjoined. Enforcement of the Reporting Rule…is also hereby enjoined, and the compliance deadline is stayed…. Neither may be enforced, and reporting companies need not comply with the CTA’s January 1, 2025, BOI reporting deadline pending further order of the Court.”
Even though compliance with the CTA is currently stayed and companies need not comply with the reporting requirement deadline, the Court’s order is preliminary in nature pending a hearing on a permanent injunction. The Court’s order will likely be appealed by the federal government. In addition, there are other cases challenging the validity of the CTA pending in different federal courts. Finally, the new administration may seek to curtail compliance with the CTA even if it is found to be valid.
During this period of considerable uncertainty, businesses should closely monitor developments both in the courts and in the federal government to understand the latest developments with respect to CTA compliance and avoid potentially costly penalties should the injunction be reversed or overturned. If you have any questions, please contact the attorneys at Navigato & Battin, LLP.