Judge Blocks Enforcement of CTA
What happened?
Recently a group of plaintiffs filed a lawsuit against the federal government to stop enforcement of the Corporate Transparency Act (“CTA”) and Final Rule Beneficial Ownership Information Reporting Requirements (“Reporting Rule”). On December 3, 2024, the U.S. District Court for the Eastern District of Texas, where the plaintiffs filed the lawsuit, issued a nationwide preliminary injunction stopping the federal government from enforcing the CTA and the Reporting Rule. The court’s rulings are temporary and will last until either the appellate court reverses the decision, or the federal government wins at the district court.
What does this mean for you?
As of December 3rd, the federal government cannot enforce the reporting obligations or deadlines under the CTA and the Reporting Rule. Reporting companies do not need to file initial reports or updated reports while this preliminary injunction is in place. If a reporting company still wishes to file despite the uncertainty of the ultimate disposition of the CTA, please contact your McGrath North attorney.
What happens next?
The federal government can appeal the ruling to the Fifth Circuit Court of Appeals. The parties can also litigate the merits of the case without appealing now. In either event, a decision is unlikely before the original January 1, 2025, reporting deadline.
This situation is developing, and there are likely to be further updates in the case. We also expect updates and guidance from FinCEN in the coming weeks as to the impact of this decision on the CTA and Reporting Rule.
What will McGrath North be doing?
McGrath North will watch this issue closely and provide prompt updates as FinCEN offers more guidance or as the appeal or litigation process develops. If you have any questions, please do not hesitate to reach out to our attorneys about this matter.
Related Attorneys
