The Corporate Transparency Act (the “CTA”) imposed new requirements for certain companies (“Reporting Companies”) to disclose identifying information about the company’s beneficial owners to the Financial Crimes Enforcement Network (“FinCEN”) in an effort to combat illicit financial activities. FinCEN currently requires Reporting Companies in existence prior to January 1, 2024, to file an initial report with their beneficial ownership information before January 1, 2025. More information about the CTA and its requirements may be found here.
On December 3, 2024, the United States District Court for the Eastern District of Texas (the “Court”) issued a nationwide preliminary injunction enjoining FinCEN from enforcing the CTA and stayed the upcoming January 1, 2025, reporting deadline. When issuing its preliminary injunction, the Court held the CTA is likely unconstitutional and, because the reporting requirement implements the CTA, the reporting requirement is also likely unconstitutional. The Court’s order may be found here.
Thus, Reporting Companies are currently not required to comply with the CTA’s upcoming January 1, 2025, reporting deadline.
The CTA is the subject of significant litigation. In prior instances, where a court has issued a ruling regarding the enforcement of the CTA, FinCEN has issued guidance as to how it would proceed in enforcing the CTA. We anticipate that FinCEN will issue similar guidance on the most recent decision. Tydings will continue to monitor developments as they occur.
What Does the Court’s Order Mean for Reporting Companies?
- Reporting Companies are currently not required to file an initial report with FinCEN.
- Beneficial owners are currently not required to disclose identifying information to FinCEN.
- Reporting Companies and beneficial owners should plan to act quickly if the Court’s order is reversed or modified in the appellate process.
For more information about the Corporate Transparency Act or the impact of the Court’s preliminary injunction, contact Zachary M.D. Jones or any member of the Tydings Business, Corporate, and Tax practice group.
This alert has been prepared by Tydings for informational purposes only and does not constitute legal advice.