Federal Court Temporarily Blocks Enforcement of Corporate Transparency Act Nationwide

On December 3, 2024, the United States District Court for the Eastern District of Texas issued a nationwide preliminary injunction against the enforcement of the Corporate Transparency Act (CTA), temporarily halting Beneficial Ownership Information (BOI) reporting to the Financial Crimes Enforcement Network (FinCEN) until further notice. 

The case, Texas Top Cop Shop, Inc., et al. v. Merrick Garland, Attorney General of the United States, et al., was brought by several small businesses and organizations, including the National Federation of Independent Business, an association consisting of approximately 300,000 members. Plaintiffs argued that the CTA imposes unconstitutional burdens on small businesses by requiring them to disclose detailed personal information about their owners and incur costs in complying with the CTA.

The court held in a 79-page opinion that the CTA likely exceeds Congress’s authority under the Commerce Clause and the Necessary and Proper Clause of the U.S. Constitution, warranting a nationwide preliminary injunction affecting all reporting companies, not just the plaintiffs in the case at hand.  While a previous court had limited the scope of its ruling to the plaintiffs in that case only, the Texas Top Cop Shop court determined that a nationwide injunction against enforcement of the CTA is appropriate. The nationwide scope of the injunction means that the CTA and its implementing regulations are temporarily blocked for all of the approximately 32.6 million existing reporting entities.  

The government is expected to appeal the ruling; however, for the time being, reporting companies need not comply with the CTA or BOI reporting until a further order is issued by the Texas Top Cop Shop court or an appellate court.

This case is only one of approximately ten similar cases currently making their way through the federal court system across the country. Stay tuned for further developments in this case and others as they arise over the coming months.