The U.S. District Court for the Eastern District of Texas in the case Tex. Top Cop Shop, Inc. v. Garland, Civil Action No. 4:24-CV-478 (E.D. Tex. Dec. 3, 2024) issued a nationwide preliminary injunction on the enforcement of the reporting requirements of the Corporate Transparency Act (CTA) and related regulations. The court determined the law is likely to be unconstitutional as beyond congressional power to regulate foreign and interstate commerce and levy taxes. The ruling may be appealed to U.S. Fifth Circuit Court of Appeals, but it is not apparent at this time whether the incoming administration will have an appetite for pursuing any appeal.
FinCEN has issued a statement that compliance is voluntary while the injunction remains in effect.[1] However, FinCEN has not indicated that it will provide for any grace period for reporting companies to file reports if the injunction is abruptly lifted.
It would be prudent for reporting companies to continue to collect information required to be disclosed on the beneficial ownership information reports. If the injunction is lifted, reporting companies may have to promptly comply.
Related articles: Ready or Not: Corporate Transparency Act Compliance is Coming; FinCEN Issues Final Rules for the Corporate Transparency Act Reporting Requirements – Significant Changes Coming to Corporate Reporting for Alaska Companies
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