We are writing to provide an important update regarding the recent legal developments related to the Corporate Transparency Act (CTA) and to offer guidance on the best course of action for compliance.
Summary:
Recent Legal Decision
As you may be aware, the U.S. District Court for the Eastern District of Texas recently issued a preliminary injunction in the case of Texas Top Cop Shop, Inc., et al. v. Garland, et al. This decision temporarily blocks the enforcement of the CTA’s beneficial ownership information (BOI) reporting requirements by the U.S. Department of Treasury. The court found that the CTA’s reporting requirements likely exceeded Congress’s authority, improperly compelled speech, and violated the right of anonymous association guaranteed by the First Amendment.
What This Means:
Implications of the Decision
This preliminary injunction is a significant development, especially for small businesses and community associations that were preparing to comply with the CTA’s reporting obligations, which were set to take effect on January 1, 2025. However, it is important to note that this is not a final decision on the constitutionality of the CTA. The case will continue to be litigated, and the final outcome remains uncertain.
Next Steps:
Compliance Guidance
Given the current legal landscape, we recommend that you continue to file with the Financial Crimes Enforcement Network (FinCEN) under the CTA’s reporting requirements until a final decision is reached. Continuing to comply with the CTA ensures that you remain in good standing and avoid any potential penalties that could arise if the injunction is lifted and the reporting requirements are reinstated.
We are aware of fourteen court challenges pending around the country, of those fourteen, only two have taken the position that the CTA is unconstitutional. Our advice to continue registration at this time is the most prudent course given that majority of courts have decided at this time the CTA is enforceable.
We understand that this situation may cause uncertainty and we are here to assist you with any questions or concerns you may have. Our team remains committed to keeping you informed about any further developments and ensuring that your compliance needs are met.
If you have any immediate questions or need further assistance, please do not hesitate to reach out.
Thank you for your attention to this important matter.
VF Law