This week, a federal district court in Texas granted a preliminary injunction halting, until further notice, nationwide enforcement of the beneficial ownership information (“BOI”) reporting requirements imposed pursuant to under the federal Corporate Transparency Act (“CTA”).

Throughout this year, attorneys at RKW Law Group have authored multiple newsletter articles advising our readers of the federal regulations that had been promulgated under the CTA by the Financial Crimes Enforcement Network (“FinCEN”),a bureau of the U.S. Treasury Department, under which business entities considered to be “reporting companies” were being required to file a BOI report, disclosing detailed ownership information that had traditionally not been required to be disclosed under the laws of most states under which such companies were formed and operated. As discussed in those prior articles, the applicable BOI report filing deadlines were within 90 days of formation for reporting companies formed in 2024, and by January 1, 2025 for reporting companies that were formed in prior years. Reporting companies formed in 2025 and thereafter would have had a 30-day reporting deadline. The FinCEN regulations threatened the imposition of substantial civil financial penalties and possibly even imprisonment against persons found to be willfully violating the BOI reporting requirements.

The Plaintiffs in the federal case, captioned Texas Top Cop Shop, Inc. vs. Garland, Case No. 4:24-CV-478 (E.D. Texas 12/3/24), primarily comprising business owners from multiple states, had sought the injunction as part of a suit to have the CTA and the BOI reporting rules promulgated under it declared unconstitutional under the Ninth and Tenth Amendments (by intruding upon rights reserved to the States respectively, and to the people), as well as under the First Amendment (by compelling speech and by burdening the right of association) and the Fourth Amendment (by compelling disclosure of private information). The Court has not yet reached a final determination on the question of the constitutionality of the CTA and its regulations, but it has now held there to be a sufficient likelihood that the Plaintiffs’ will prevail on at least their Ninth and Tenth Amendment challenges, along with holding that the Plaintiffs have met their burden with respect to the other established requirements for obtaining equitable relief, to justify the issuance of the injunction.

As a result of the Court’s ruling, all entities nationwide that would constitute “reporting companies” as defined under the CTA are now relieved of the requirement to file a BOI report (or to take any further actions with respect to previously filed reports, such as updating or correcting any information contained therein), for so long as the injunction remains in effect.

While the Court’s ruling may be appealed to the U.S. Court of Appeals for the Fifth Circuit, it is not known yet whether the government intends to pursue an appeal or not. If the injunction were to be lifted or reversed on appeal, enforcement of the CTA could resume, in which event BOI reporting requirements would be reinstated (although likely with new timelines, given that the injunction was issued so near to the January 1, 2025 reporting deadline that had been applicable to most reporting companies).

The attorneys at RKW Law Group will continue to monitor this matter and will provide prompt updates of any new developments.