News

U.S. District Court suspends enforcement of Corporate Transparency Act (CTA) and FinCEN implementing regulations

11 December 2024

On December 3, 2024, the U.S. District Court for the Eastern District of Texas suspended the enforcement of the U.S. Corporate Transparency Act (“CTA”) and its implementing regulations issued by the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (“FinCEN”). The court’s opinion states that "reporting companies" do not need to comply with the CTA’s January 1, 2025, deadline, and FinCEN has made a similar statement that reporting companies are currently not required to file their beneficial ownership information. The Government has appealed the District Court’s decision to the Fifth Circuit. In light of the uncertainty around the filing deadline, companies may choose to continue preparations for filing required reports by January 1, 2025, but should refrain from actually filing until there is more certainly regarding whether it is required. Our team is monitoring for updates and is available in the interim for any questions or concerns.

On December 3, 2024, the U.S. District Court for the Eastern District of Texas issued a preliminary injunction suspending enforcement of the CTA and accompanying implementing regulations issued by FinCEN. The court's opinion states that “reporting companies” do not need to comply with the CTA’s January 1, 2025 deadline for filing beneficial ownership information.

Outstanding questions regarding beneficial ownership reporting requirements

At this time, there is still uncertainty regarding:

(1) Whether the CTA’s beneficial ownership reporting requirements will be reinstated through a stay or narrowing of the injunction;
(2) whether the compliance deadline would remain January 1, 2025, or be extended to a later date; and
(3) The merits of the plaintiffs’ claims, given the court only determined, in its own words, that the “CTA and Reporting Rule are likely unconstitutional for purposes of a preliminary injunction. It has not made an affirmative finding that the CTA and Reporting Rule are contrary to law or that they amount to a violation of the Constitution.”

Companies may choose to continue preparations to file beneficial ownership reports with FinCEN by January 1, 2025, and refrain from making the actual filing until further information is available about whether and when the filing would be required. Alternatively, companies may proceed with making their FinCEN filings, recognizing such filings may no longer be necessary. Additionally, some companies may decide to pause their CTA-related workstreams in anticipation of a later deadline, though they should be prepared for the possibility that the January 1, 2025, deadline may still be reinstated at a later date.

Authored by Sara Lenet, Elizabeth Boison, Bradley Kulman, Karen Scanna, Julia Diaz, Nathan Truong

Next steps

Our team is monitoring for any updates to be able to advise on the best course of action with the year-end filing deadline approaching quickly. In the interim, we are available to assist with any questions or concerns.