By: Zahra Smith and Tom Bealer

New York, New York – On December 3, 2024, the U.S. District Court for the Eastern District of Texas issued a nationwide preliminary injunction that bars the federal government from enforcing the Corporate Transparency Act (CTA). The Texas case was brought by a group of plaintiffs, including small business owners and a trade association, which argued that Congress overstepped its constitutional authority in passing the CTA. In an order issued by the U.S. District Judge Amos L. Mazzant, the Court determined that the plaintiffs were likely to succeed in their claims. While the plaintiffs sought a preliminary injunction for themselves and their members, the Court issued a nationwide injunction.

The Court’s Order prohibits both the enforcement of the CTA and the rules implemented by FinCEN. However, because the Court ruling is a preliminary injunction and not a final decision, the ruling only temporarily halts the enforcement of the CTA nationwide, though enforcement could resume if the decision is overturned on appeal, or if the government ultimately prevails. Notably, this is not the first challenge to the constitutionality of the CTA, as earlier this year the federal government appealed an Alabama United States District Court ruling that the CTA is unconstitutional. That appeal is pending with the United States Eleventh Circuit Court of Appeals.

FinCEN has not yet issued a statement about the US District Court’s Order or the status of CTA enforcement. It is likely however, that the Court’s decision will be appealed.

While we await a statement from FinCEN, reporting companies who have not yet complied with the CTA, are encouraged to seek legal guidance to evaluate their exposure under the CTA if the injunction is lifted or enforcement resumes.

RPCK will continue to closely monitor developments and as always, RPCK lawyers are available to assist with any questions that you may have.