On December 3, 2024, a Texas district court issued an order granting a nationwide preliminary injunction against enforcement of the January 1, 2025, compliance deadline for businesses to register their Beneficial Ownership Information (BOI). The BOI registration arises out of the Corporate Transparency Act (31 USC § 5336). The CTA was passed in 2020 to require legal entities (with few exceptions) extant as of December 31, 2024, to report information on who owns or controls the entity. The information is to be reported to the U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN). The CTA’s largest impact is on small businesses—over 30 million of them. Significant civil fines (some as much as $500 per day) and even criminal penalties can be imposed for failing to register or update BOI.
In a 79-page opinion, U.S. District Judge Amos Mazzant laid the grounds for his determination that the CTA is “likely unconstitutional” and that its expansive reach justified a nationwide injunction against the CTA and its Reporting Rule. Judge Mazzant wrote at p. 77:
The Court determined that the injunction should apply nationwide. Both the CTA and the Reporting Rule apply nationwide, to “approximately 32.6 existing reporting companies.” … And, as the Government states, the Court cannot provide Plaintiffs with meaningful relief, without, in effect, enjoining the CTA and the Reporting Rule nationwide. The extent of the constitutional violation Plaintiffs have shown is best served through a nationwide injunction.
The injunction (1) stays the Reporting Rule’s compliance deadline; (2) enjoins (prohibits) enforcement of the CTA; and (3) enjoins enforcement of the Reporting Rule, all in order to “maintain the status quo and protect the parties from irreparable harm.” It was ordered that “[n]either may be enforced, and reporting companies need not comply with the CTA’s January 1, 2025, BOI reporting deadline pending further order of the Court.” View the Memorandum Opinion and Order attached below.
The Department of Justice (DOJ) will likely appeal the injunction to the Fifth Circuit Court of Appeals. While it is pending, the DOJ can choose to honor the preliminary injunction or ask the Fifth Circuit to lift the injunction during appeal. Whether companies will have to comply with the CTA—or whether the preliminary injunction becomes a permanent injunction prohibiting enforcement of the CTA—may not be resolved until after January 1, 2025.
On December 3, 2024, a Texas district court issued an order granting a nationwide preliminary injunction against enforcement of the January 1, 2025, compliance deadline for businesses to register their Beneficial Ownership Information (BOI). The BOI registration arises out of the Corporate Transparency Act (31 USC § 5336). The CTA was passed in 2020 to require legal entities (with few exceptions) extant as of December 31, 2024, to report information on who owns or controls the entity. The information is to be reported to the U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN). The CTA’s largest impact is on small businesses—over 30 million of them. Significant civil fines (some as much as $500 per day) and even criminal penalties can be imposed for failing to register or update BOI.
In a 79-page opinion, U.S. District Judge Amos Mazzant laid the grounds for his determination that the CTA is “likely unconstitutional” and that its expansive reach justified a nationwide injunction against the CTA and its Reporting Rule. Judge Mazzant wrote at p. 77:
The Court determined that the injunction should apply nationwide. Both the CTA and the Reporting Rule apply nationwide, to “approximately 32.6 existing reporting companies.” … And, as the Government states, the Court cannot provide Plaintiffs with meaningful relief, without, in effect, enjoining the CTA and the Reporting Rule nationwide. The extent of the constitutional violation Plaintiffs have shown is best served through a nationwide injunction.
The injunction (1) stays the Reporting Rule’s compliance deadline; (2) enjoins (prohibits) enforcement of the CTA; and (3) enjoins enforcement of the Reporting Rule, all in order to “maintain the status quo and protect the parties from irreparable harm.” It was ordered that “[n]either may be enforced, and reporting companies need not comply with the CTA’s January 1, 2025, BOI reporting deadline pending further order of the Court.” View the Memorandum Opinion and Order attached below.
The Department of Justice (DOJ) will likely appeal the injunction to the Fifth Circuit Court of Appeals. While it is pending, the DOJ can choose to honor the preliminary injunction or ask the Fifth Circuit to lift the injunction during appeal. Whether companies will have to comply with the CTA—or whether the preliminary injunction becomes a permanent injunction prohibiting enforcement of the CTA—may not be resolved until after January 1, 2025.
