Corporate Transparency Act Preliminary Injunction
On December 3, 2024, a Texas Federal District Court issued a nationwide preliminary injunction against the enforcement of the Corporate Transparency Act (CTA). The CTA mandates more than 32 million small businesses to disclose to the United States Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN), by January 1, 2025, confidential information regarding their “beneficial owners.” The law was intended to capture key information in order to identify and pursue money laundering and other illegal uses of various business structures. The court found that the CTA’s requirements were likely unconstitutional, and that its implementation would irreparably harm companies who are forced to comply.
Previously, other cases have questioned the CTA’s constitutionality, resulting in preliminary injunctions for those specific plaintiffs. This new ruling is unique because the court held that the preliminary injunction covers the entire United States. As a result, the January 1, 2025 deadline for existing companies, the 90-day deadline for new companies to report under the CTA, as well as the enforcement of any penalties under the CTA, have been suspended. This suspension under the preliminary injunction will continue until the court rules otherwise, or until the constitutionality of the case is finally adjudicated by the courts.
Stay apprised of new developments
We believe that the government will appeal this district court ruling to the 5th Circuit Court of Appeals, which means it’s likely not the last word with regard to the deadlines and enforcement under the CTA. If the Court of Appeals modifies or overturns the preliminary injunction, then a new effective date may be issued by the court. If the preliminary injunction is upheld, then the requirements of the CTA will be effective only if it is determined to be constitutional.
So, if you’ve not yet filed as a reporting company under the CTA, stay tuned and be prepared in the event the government is successful in its appeal. We will continue to monitor this case closely, but we’d also recommend that you check with your legal counsel about your response to this new development.
If you’d like to read the opinion to understand the court’s reasoning regarding the CTA’s constitutionality, here’s a link to the document: https://www.cir-usa.org/wp-content/uploads/2024/05/cta-v-garland-district-court-opinion-preliminary-injunction.pdf
ABOUT THE AUTHOR
John Schuman, JD, CFP®
John is a Partner, Head of Wealth Transfer at Corient, based in our Columbus, OH, office. Previously, he was a Partner, Co-CEO and President of legacy firm Budros, Ruhlin & Roe. As a CERTIFIED FINANCIAL PLANNER™ certificant, licensed attorney and former Certified Public Accountant (CPA), he adds an exceptional perspective to the firm. John’s expertise includes estate planning and taxation, income tax, general business and succession planning, and charitable and retirement planning. He has been a featured speaker at conferences of the Columbus Bar Association, the Financial Planning Association (FPA), the National Association of Personal Financial Advisors (NAPFA), the Ohio CLE Institute, The Columbus Foundation and the International Association of Advisors in Philanthropy.
John holds a Bachelor of Science from The Ohio State University and a Juris Doctorate from Capital University Law School (summa cum laude). John is a member of the Financial Planning Association (FPA), the National Association of Personal Financial Advisors (NAPFA), and the Columbus, State of Ohio and American Bar Associations. He also serves as a member of the Professional Council of The Columbus Foundation.
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