Federal Judge Blocks Enforcement of Corporate Transparency Act’s BOI Filing Requirements Nationwide

On December 3, 2024, the U.S. District Court for the Eastern District of Texas issued a nationwide preliminary injunction halting the enforcement of the Corporate Transparency Act (CTA) and its Beneficial Ownership Information (BOI) reporting requirements. This decision temporarily suspends the January 1, 2025, deadline for millions of businesses to file BOI reports with the Treasury Department’s Financial Crimes Enforcement Network (FinCEN).

The CTA, enacted in 2021, mandates that corporations, limited liability companies (LLCs), and similar entities disclose information about their beneficial owners—individuals who exercise substantial control over the entity or own at least 25% of its ownership interests. The legislation aims to combat illicit activities such as money laundering and terrorism financing by increasing transparency in corporate ownership structures.

In the case of Texas Top Cop Shop Inc. v. Yellen, the plaintiffs argued that the CTA exceeded Congress’s constitutional authority by imposing reporting requirements on entities regardless of their commercial activity. Judge Amos L. Mazzant III concurred, describing the CTA as a “flanking, quasi-Orwellian statute” with concerning implications for governmental structure. He concluded that the CTA lacked a sufficient nexus to any enumerated power, rendering it unconstitutional.

This ruling follows a similar decision from March 2024, when the U.S. District Court for the Northern District of Alabama declared the CTA unconstitutional in National Small Business United v. Yellen. However, the Alabama court’s injunction applied only to the plaintiffs and members of the National Small Business Association as of March 1, 2024. In contrast, the Texas court’s injunction extends nationwide, affecting all entities subject to the CTA’s reporting requirements.

The Department of Justice is expected to appeal the Texas court’s decision, which could lead to further legal proceedings and potential changes to the CTA’s enforcement status. In the interim, businesses are advised to stay informed about developments and consult legal counsel to understand their compliance obligations.

While the preliminary injunction suspends the immediate enforcement of the CTA’s BOI reporting requirements, the long-term future of the legislation remains uncertain. Entities should continue to monitor legal updates and be prepared to comply with any future mandates that may arise from ongoing litigation or legislative action.