Under the CTA, many companies are required to submit information about themselves and their beneficial owners to the Financial Crimes Enforcement Network (FinCEN), a bureau within the US Department of Treasury. Reporting companies formed before January 1, 2024, have until the end of this year to file their initial beneficial ownership information (BOI) reports. See our prior alert for additional background about the CTA and BOI reporting.
The case in which the nationwide preliminary injunction was issued is Texas Top Cop Shop, Inc. v. Garland (Docket No. 4:24-CV-478). In its order, the court determined that (1) the plaintiffs in the case (an individual, three small businesses, the Libertarian Party of Mississippi, and the National Federation of Independent Business (NFIB)) are likely to suffer irreparable harm in the absence of preliminary relief, (2) the plaintiffs have demonstrated a substantial likelihood of success in arguing that the CTA is unconstitutional, (3) the harm posed by the CTA outweighs any damage that the preliminary injunction may inflict on the government, and (4) injunctive relief would not harm the public interest.
The preliminary injunction was sought by the plaintiffs only on behalf of themselves and the NFIB’s approximately 300,000 members. However, the court determined that a nationwide ban on the CTA’s enforcement would be appropriate, as the NFIB’s membership extends across the country, and the plaintiffs could not receive meaningful relief without a nationwide preliminary injunction. Thus, under the terms of the court’s order, the CTA is enjoined entirely, as is the primary reporting rule (for BOI reporting) that was issued under it by FinCEN. The court’s order further bars enforcement of the January 1, 2025, BOI reporting deadline.
As of the time of this alert’s publication, FinCEN has not yet released a statement addressing its approach to the CTA’s enforcement in light of the court’s preliminary injunction, although such a statement may be forthcoming. The government may decide to appeal this preliminary injunction to the US Court of Appeals for the Fifth Circuit and may also potentially seek an order staying the effect of this preliminary injunction pending the resolution of any such appeal. None of this has been determined as of the time of this alert’s publication.
Companies that have not yet filed their BOI reports under the CTA may wish to delay making those filings until there is more clarity on the CTA’s fate. Nonetheless, given that there is less than a month remaining until the January 1, 2025, BOI reporting deadline for companies formed before 2024 (and companies formed in 2024 have 90 days to file their initial reports), entities that are reporting companies under the CTA should consider continuing their internal efforts to assemble the information required for their reports, even if they are taking a wait-and-see approach with respect to the filings themselves.
