Corporate Transparency Act (CTA) Compliance Update
On December 3, 2024, U.S. District Judge Amos Mazzant in the Eastern District of Texas issued a temporary nationwide preliminary injunction against the enforcement of the Corporate Transparency Act (CTA), which mandates that corporations disclose their beneficial owners to the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN). Judge Mazzant’s decision in Texas Top Cop Shop, Inc., et al. v. Garland, et al. deemed the CTA likely unconstitutional, citing overreach into areas traditionally regulated by states and potential violations of the Tenth Amendment.
This ruling aligns with a prior decision from an Alabama federal judge earlier this year, which also found the law unconstitutional but applied the injunction only to the parties involved in that case. In contrast, Judge Mazzant’s injunction has a nationwide scope, temporarily halting the CTA’s enforcement just before the compliance deadline.
But it is important to note that while the court has temporarily enjoined enforcement of the law, this ruling does not permanently stop compliance with the CTA. The federal government is expected to appeal this decision.
FinCEN has issued the following official statement for our compliance partner:
“The Corporate Transparency Act (CTA) plays a vital role in protecting the U.S. financial system, as well as people across the country, from illicit finance threats like terrorist financing, drug trafficking, and money laundering. We continue to believe—consistent with the conclusions of other federal courts—that the CTA is constitutional. Yesterday’s ruling is one of several cases pending before courts around the country, including ones in which district courts have denied requests to enjoin the CTA and that are now before courts of appeals. We are reviewing the ruling to determine our next steps.”
Practical Recommendations for Doss Law Clients
Given the uncertain legal landscape, it is prudent for businesses to continue their ongoing compliance preparations to meet the compliance deadline of January 1, 2025, despite the temporary court order. This includes gathering and organizing necessary information about beneficial owners to avoid last-minute challenges if the CTA’s requirements are upheld.
Until FinCEN explicitly ceases enforcement based on final court rulings, proactive compliance efforts should remain a priority to mitigate risks associated with potential non-compliance.
For further guidance or support with compliance strategies, please consult with Jackellyn T. Davis at jackellyn@dosslaw.com.
