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.).
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.
In a legal example of FAFO, Judge Mazzant writes: “At the Court’s hearing, Plaintiffs suggested that they sought an injunction on behalf of only the Plaintiffs before the Court, including the approximately 300,000 members of NFIB. The Government responded that if the Court were to enjoin the CTA and Reporting Rule, the scope of which included NFIB’s members, then the Court would, in practical effect, enter a nationwide injunction. The Court agrees with the Government’s point. A nationwide injunction is appropriate in this case. . . . NFIB’s membership extends across the country. And, as the Government states, the Court cannot provide Plaintiffs with meaningful relief without, in effect, enjoining the CTA and Reporting Rule nationwide. The extent of the constitutional violation Plaintiffs have shown is best served through a nationwide injunction.”
Businesses that have not filed a FinCEN report to date may question the effect of the preliminary injunction. As of December 4, 2024, the CTA’s reporting requirements are unenforceable. However, the preliminary injunction only temporarily enjoins enforcement of the CTA and is subject to appeal and further procedural developments. A business with questions should seek counsel regarding CTA compliance. Businesses also need to consider any applicable confidentiality obligations if they choose to file a FinCEN report while the preliminary injunction is in effect.
Read the entire opinion below:
