By Bob Dunlevey of Taft/Law on Thursday, 12/5/2024
On December 3, 2024, the U.S. District Court for the Eastern District of Texas entered a nationwide injunction against enforcement of the Corporate Transparency Act (CTA). The District Court issued an opinion and order in the case of Texas Top Cop Shop, Inc., et al. v. Merrick Garland, Attorney General of the United States (Case No. 4:24-cv-478). The court found that the CTA likely is unconstitutional. The court granted the plaintiffs' motion for a preliminary injunction, finding, “. . . the CTA . . . is hereby enjoined[,] . . . [e]nforcement of the [final rule implementing the CTA] is also hereby enjoined, and the compliance deadline is stayed . . . . Neither may be enforced and reporting companies need not comply with the CTA’s January 1, 2025, . . . reporting deadline pending further order of the Court.”
Consistent with the court’s order, reporting companies, on a nationwide basis, have been temporarily relieved from any requirement to comply with the CTA or its reporting requirements pending further action in that case. The Department of Justice is expected to appeal this decision to the Fifth Circuit Court of Appeals on an expedited basis. As part of its appeal, the Department of Justice may seek an emergency stay of the district court’s order. The likelihood of whether the Fifth Circuit will grant any request by the government to stay the order, or whether it will ultimately affirm or reverse the nationwide injunction is unknown. Given the implications of the nationwide injunction and its proximity to the January 1, 2025 deadline for many entities that would be required to file under the CTA, Taft expects that the Department of Justice’s filings will provide more clarity as to how the government views compliance with the impending deadline during any appeal to the Fifth Circuit.
Taft will continue to monitor this litigation and its implications on the future of the CTA and will provide additional alerts as information becomes available.
A copy of the district court’s order issuing the nationwide temporary injunction can be found here.
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