CTA Filing Requirements Suspended

Enforcement Halted Pending Constitutional Review

We want to bring your attention once again to significant recent developments pertaining to the Corporate Transparency Act (the “CTA”).

As of December 26, 2024, the CTA is again unenforceable until its constitutionality can be decided on the merits. This means that CTA filings are not currently required.

Here is the background:

· On January 1, 2024, the CTA became effective and imposed reporting obligations which impact millions of small businesses across the United States.                       

· On December 3, 2024, the U.S. District Court for the Eastern District of Texas issued a court order in Texas Top Cop Shop, Inc., et al. v. Garland, which effectively enjoined enforcement of the CTA and its January 1, 2025 filing deadline.

· On December 23, 2024, the Fifth Circuit Court of Appeals granted the U.S. Department of Justice’s (the “DOJ”) motion to lift the December 3rd preliminary injunction, thereby reinstating the CTA as enforceable pending the results of the appeal. The Fifth Circuit Court of Appeals found that the DOJ, in defending the statute, “made a strong showing that it is likely to succeed on the merits in defending CTA's constitutionality.”

· On December 26, 2024, the merits panel of the Fifth Circuit Court of Appeals vacated the order lifting the preliminary injunction. As a result, the federal government cannot enforce the CTA until the appeal before the Fifth Circuit Court of Appeals is decided.                       

Although the ultimate fate of the CTA is currently unknown, if the statute is deemed enforceable, failure to comply with the filing requirements would subject violators to a $591 daily penalty. If you own a company, we therefore urge you to familiarize yourself with the CTA and determine whether your company is required to file to ensure that you are prepared to comply with its reporting requirements should the statute be deemed constitutional and enforceable. Companies that are required to file and looking to check CTA compliance off their to-do list are also welcome to complete the filing on a voluntary basis while the constitutionality of the CTA is being challenged in court.

For further background on the CTA, what companies it applies to, reporting requirements, and the information that must be disclosed, please see our Firm’s initial client alert on the CTA at: Client Alert: Corporate Transparency Act - Mandelbaum Barrett PC, and FinCEN’s website at: https://www.fincen.gov/boi