Our firm has been actively communicating with clients regarding – and monitoring multiple lawsuits challenging – the federal Corporate Transparency Act (CTA) ahead of its upcoming Jan. 1, 2025, reporting deadline for entities formed before Jan. 1, 2024.

The CTA requires most entities to report their beneficial ownership information to the Financial Crimes Enforcement Network (FinCEN).

On Dec. 3, 2024, a federal judge in the Eastern District of Texas in Texas Top Cop Shop, Inc., et al. v. Garland, et al. (Case No. 4:24-cv-478 [E.D. Tex.]) issued a nationwide preliminary injunction against the enforcement of the CTA and its reporting obligations.

This means that for now entities need not comply with the Jan. 1, 2025, reporting deadline.

This ruling is not necessarily a surprise, considering the multiple other pending lawsuits challenging the law’s constitutionality (including lawsuits challenging the rule in Maine, Ohio, Michigan, and the 11th and 9th circuits).

In issuing the order, the court ruled that the plaintiffs met the standard for a preliminary injunction by showing:

• the CTA and its reporting rule threaten the plaintiffs with irreparable harm;

• a substantial likelihood of success exists in their claims that the CTA is unconstitutional;

• the threatened harm to plaintiffs in complying with the CTA outweighs any injury to the government; and

• that preliminary injunctive relief will not harm the public.

The court reasoned the law is likely unconstitutional as outside Congress’s power. It also noted the significant compliance costs the CTA imposes on businesses in preparing required reports.

As of this writing, the U.S. Department of Justice has not indicated whether it will appeal this ruling. An appeal, however, seems likely.

There will, no doubt, be more to come.

This article was originally published on the State Bar of Wisconsin’s Business Law Blog. Visit the State Bar sections or the Business Law Section webpages to learn more about the benefits of section membership.