9th Dec 2024

Corporate Transparency Act Injunction
Corporate Transparency Act Injunction-nationwide injunction halts federal reporting regulations.
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The U.S. District Court has issued a nationwide injunction halting the Financial Crimes Enforcement Network (FinCEN), a branch of the United States Department of Treasury, from enforcing federal regulations of the Corporate Transparency Act.

The purpose of the initial enforcement of this legislation was to reduce and prevent financial crimes organized through shell companies by requiring most small to mid-sized businesses (those not exempt from the CTA parameters) in the United States to report who owns and/or controls the business by filing a Beneficial Ownership Information (BOI) report with FinCEN. This process was enacted to help inhibit corrupt businesses and prevent criminals from engaging in various types of illegal activity such as money laundering, drug trafficking, terrorism, and financial fraud.

On December 3rd, this legislation was declared “likely unconstitutional” by a Judge from the US District Court for the Eastern District of Texas. The US Department of Treasury is now blocked from enforcing the legislation.

After this initial legislation was passed, businesses started to challenge the law in many different courts stating that it was burdensome and inadequately targeting particular businesses.

This injunction comes just a couple weeks before the BOI reports were due (January 1, 2025) for non-exempt businesses that were formed prior to January 1, 2024. Non-exempt businesses formed on or after January 1, 2024, had a time frame of 90 days to report the necessary information. Non-exempt businesses formed after January 1, 2025 had a time frame of 30 days from formation to report the necessary information.

This injunction is not a final determination of the legislation, but rather a halt in the enforcement of it until it is determined to be unconstitutional or not. The injunction does not prohibit the filing of BOI reports with FinCEN, it merely suspends the legal obligation to do so. We expect a communication to be issued from FinCEN in the coming days that should provide guidance.

We will continue to update our blog with the most recent information regarding this legislation.

Written by Michael C. Gibbons

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