by Matthew Bisanz, Brad A. Resnikoff, and Kelly F. Truesdale
Matthew Bisanz, Brad A. Resnikoff, and Kelly F. Truesdale (Photos courtesy of Mayer Brown)
On December 3, 2024, the US District Court for the Eastern District of Texas entered a preliminary injunction suspending enforcement of the Corporate Transparency Act (CTA) and its implementing regulations nationwide, concluding that the CTA is likely unconstitutional as it is outside Congress’s power.[1] Although not the first court to reach such a conclusion, the breadth of the relief provided by the court—applying nationwide, rather than to the specific plaintiffs—reflects a significant development, given the rapidly approaching compliance deadlines for many existing companies under the CTA.
The Texas court’s decision has immediate implications for the 32 million reporting companies facing a year-end deadline to report beneficial ownership information to the government, particularly as reporting in early December indicated that only about 30% of the estimated total filings had been received.[2] While the Texas court’s decision effectively suspends the compliance deadline—as the Financial Crimes Enforcement Network (FinCEN) has confirmed—during the pendency of the injunction, the Government has already appealed the decision to the Fifth Circuit and is currently seeking to stay the effect of the preliminary injunction.