As you probably heard, the U.S. District Court for the Eastern District of Texas issued a nationwide preliminary injunction on December 3, 2024 to stop the Federal government from enforcing the Corporate Transparency Act (the “CTA”) and the regulations implemented under the CTA. The case is called Texas Top Cop Shop, Inc. et al. v. Garland, et al. The court referred to the CTA as “quasi-Orwellian” and decided that it was “likely unconstitutional.”

It took just two days for the U.S. Department of Justice to appeal this ruling to the United States Court of Appeals for the Fifth Circuit. The Financial Crimes Enforcement Network (FinCEN), the agency charged with enforcing the CTA, issued a press release reassuring reporting companies that no action will be taken against them for failing to file their beneficial ownership information while the Texas court’s order remains in place. FinCEN did not, however, indicate whether it would provide a grace period for filing should the injunction be lifted. It noted that reporting companies may continue to voluntarily file those reports during the period that the stay is in effect. Yesterday, the Department of Justice filed a motion with the District Court to lift the injunction while the Fifth Circuit considers the appeal. If this motion is granted, reporting companies (other than the plaintiffs named in the Texas Top Cop Shop case) would be required to file their beneficial ownership reports as if the District Court injunction had never been entered.

Last year, we warned you in our business law blog that a new law, the federal Corporate Transparency Act, would be going into effect that would require many businesses to provide information about their owners and anyone who controls the company to the federal government. We now know that this law will take effect on January 1, 2024. Reporting companies in existence prior to that date have until January 1, 2025 to comply; companies formed on or after that date must comply within 30 days after formation. Once the data has been entered, companies are obligated to update any information that becomes outdated or is incorrect. The information will be included in a database that will be used to combat money laundering, financing of terrorism, and other illegal activities.