As you know from our previous communications, the Corporate Transparency Act (CTA) reporting deadline of January 1, 2025, is right around the corner. A decision came down in court, resulting in a pause on the enforcement of the deadline. As to when things may proceed, we are unsure because many things can happen in the courts. This is more of an FYI to keep you informed on the latest updates. See below for the full details.
On December 3, the Hon. Amos L. Mazzant III of the US District Court for the Eastern District of Texas in the case Tex. Top Cop Shop, Inc. v. Garland, E.D. Tex., No. 4:24-cv-00478 issued a nationwide preliminary injunction barring enforcement of the CTA reporting requirements premised on what the court deemed the “likely unconstitutional[ity]” of the Act. This injunction applies to all reporting companies that are facing a deadline to report on or before January 1, 2025. On December 5, the federal government appealed Judge Mazzant’s ruling and such appeal is now pending before the court. The Financial Crimes Enforcement Network, the federal agency responsible for enforcing the Act, issues a statement in response to the court’s December 5 ruling, stating, in part, that “[w]hile this litigation is ongoing, FinCEN will comply with the order …. Therefore, reporting companies are not currently required to file their beneficial ownership information [(BOI)] with FinCEN and will not be subject to liability if they fail to do so while the preliminary junction remains in effect.” The statement goes on to advise that companies may still voluntarily submit its BOI report. The full statement can be found HERE.
The Texas case is one of several challenges to the CTA currently working their way through the federal courts. In March of this year, the US District Court for the Northern District of Alabama, in NSBU v. Yellen, entered a final declaratory judgment finding the CTA unconstitutional, as exceeding constitutional limits on Congress’s power, and permanently enjoined enforcement of the CTA against the plaintiffs in the case. This case is also currently on appeal in the Eleventh Circuit.
Given these decisions, and the looming deadline of January 1, 2025 you are likely wondering what to do next. We recommend that companies with CTA reporting obligations weigh carefully the consequences of not voluntarily complying with the CTA during the period of the preliminary injunction. As it is currently unclear the timing of the court hearing the filed appeal, whether a stay of the injunction is contemplated or whether any extension of the filing period or grace period will be given if the injunction is lifted, we encourage our clients to either
We will be monitoring this case and other pending cases, such as in the Western District of Michigan and Eastern District of Virginia, as well as guidance that may come from FinCEN relative to this preliminary injunction or those companies who have already filed.
If you have further questions regarding your reporting requirements, we encourage you to contact a legal professional in enough time to timely report.
Green Ridge Wealth Planning, LLC is a registered investment adviser. The information provided here is for general informational purposes only and should not be considered an individualized recommendation or personalized investment / tax advice. The investment / tax strategies mentioned here may not be suitable for everyone. Each investor needs to review an investment / tax strategy for his or her own particular situation before making any investment decision. You are responsible for consulting your own investment and/or tax advisor as to the consequences associated with any investment.
The opinions referenced are as of the date of publication and are subject to change due to changes in the market or economic conditions and may not necessarily come to pass. Any opinions, projections, or forward-looking statements expressed herein are solely those of AUTHOR, may differ from the views or opinions expressed by other areas of Green Ridge Wealth Planning, LLC, and are only for general informational purposes as of the date indicated.
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