On December 3rd, a federal court in Texas issued a nationwide injunction halting the enforcement of the Corporate Transparency Act (CTA). The court ruled that the CTA doesn’t regulate existing business activity but instead requires businesses to take new actions—disclosing ownership information—which exceeds the regulatory power granted to Congress.
However, just two days later, on December 5, 2024, the Department of Justice (DOJ) appealed the decision to the Fifth Circuit Court of Appeals, challenging the injunction. The DOJ has also requested a stay of the injunction, which, if granted, would restore the authority of the Financial Crimes Enforcement Network (FinCEN) to enforce the CTA before the January 1, 2025, deadline.
The Fifth Circuit will assess factors such as the likelihood of the DOJ succeeding on appeal, the balance of harms, and public interest. A decision is expected soon. In the meantime, many businesses are continuing to prepare for CTA compliance, anticipating the potential for a stay. Our filing platform partner, FinCENFetch, is actively monitoring the situation and will provide updates as it unfolds.
At this time, no immediate action is required from Board members. However, based on legal advice, it may be wise to begin collecting beneficial ownership information (BOI) now. While reports cannot currently be submitted, if the stay is granted, having the information already collected will allow us to file reports quickly and ensure compliance before the deadline. It’s worth noting that a similar challenge earlier this year ultimately resulted in the DOJ prevailing.
Please visit CAI’s Corporate Transparency Act resource page for additional information.
