Texas Court Issues Injunction Stopping Enforcement of New Corporate Transparency Law

Texas Court Injunction on Corporate Transparency Act (CTA)

Nationwide Injunction on CTA Enforcement:

• • A Texas federal court has issued an injunction prohibiting the federal government from enforcing the Corporate Transparency Act (CTA) nationwide.
  • The court ruled that the CTA may be unconstitutional and held that Congress overstepped its legislative powers in enacting it.

Purpose of the CTA:

• • The CTA aims to assist law enforcement in preventing terrorism, money laundering, and other financial crimes by requiring businesses to disclose beneficial ownership information to the Financial Crimes Enforcement Network (FinCEN).

Compliance Requirements Under CTA:

• • Under the CTA, anyone who owns 25% or more of a Corporation, LLC (including single member LLC), or Partnership, would have been required to report their ownership to the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN). 

  • Reporting deadlines:

    • Entities formed on or after January 1, 2024, must file ownership reports within 30 days of formation.

    • Entities formed before January 1, 2024, were expected to file by January 1, 2025.

    • Updates to ownership information (e.g., transfers or changes) must also be reported within 30 days to avoid penalties.

Legal Uncertainty:

• • The court’s ruling halts enforcement but is not expected to be the final decision on the CTA’s constitutionality or implementation.
  • In it’s ruling, the court stated that Congress exceeded its legislative powers when it enacted the CTA.
  • Legal experts anticipate further litigation and rulings on the CTA's enforceability.