On December 3, 2024, the United States District Court for the Eastern District of Texas issued a nationwide preliminary injunction against enforcement of the Corporate Transparency Act (“CTA”). Enacted as part of the Anti-Money Laundering Act of 2020, the CTA requires certain legal entities to report beneficial ownership information (“BOI”) to the U.S. Department of Treasury’s Financial Crimes Enforcement Network (“FinCEN”). The reporting provisions took effect on January 1, 2024. In Texas Top Cop Shop v. Garland (4:24-cv-00478-ALM), the District Court, in a memorandum opinion, rejected the Government’s position when it held that “the CTA appears likely unconstitutional,” and accordingly, issued a nationwide preliminary injunction against enforcement of the CTA and its implementing regulations, including staying the January 1, 2025 compliance deadline. The memorandum opinion and order can be found here.
This decision comes just a few months after National Small Business United v. Yellen (5:22-cv-01448-LCB), in which the District Court for the Northern District of Alabama held that the CTA exceeded Congress’ power to regulate commerce and permanently enjoined its enforcement against plaintiffs in that case, and just a few weeks before the year-end BOI reporting deadline for entities created prior to January 1, 2024, which the Eastern District of Texas stayed.
At this time, entities will not be required to comply with the reporting deadline and there will be no penalty for non-compliance. However, this is preliminary, and McGuireWoods will be closely monitoring developments in each of these cases.
For questions about this decision, the CTA, or AML compliance generally, including customer due diligence and beneficial ownership rules, contact the authors of this article or another member of the McGuireWoods Financial Services & Securities Enforcement team, Government Investigations & White Collar Litigation team, Healthcare team, Tax & Employment Benefits team, or Corporate & Private Equity team.