We wanted to share an important update about the Corporate Transparency Act (CTA) and its potential impact on businesses across the United States.

On December 3rd, 2024, the U.S. District Court for the Eastern District of Texas issued a preliminary injunction halting the enforcement of the CTA and its Beneficial Ownership Information (BOI) reporting requirements. This pause provides businesses with temporary relief but also raises critical questions about what comes next.


What is the Corporate Transparency Act?

The CTA, enacted in 2021 as part of the Anti-Money Laundering Act, requires corporations, LLCs, and similar entities to report detailed information about their beneficial owners to the Financial Crimes Enforcement Network (FinCEN). This includes:

• Full legal names
• Dates of birth
• Residential or business addresses
• Identification numbers (e.g., from passports or driver’s licenses)

Non-compliance could lead to penalties, including fines up to $10,000 or imprisonment for up to two years.


What the Court Ruled

The court issued the injunction over several concerns:

• Federal Overreach: The CTA introduces regulations traditionally governed by state law, raising concerns about the balance of federal and state authority.
• Privacy Concerns: The requirement to disclose sensitive personal data, such as identification numbers and residential addresses, has been criticized as a potential violation of Fourth Amendment protections.
• Impact on Small Businesses: The compliance costs and administrative burden fall heavily on small and medium-sized businesses, which may lack the resources to meet the reporting requirements effectively.

While the CTA remains intact, enforcement is temporarily paused while the case proceeds through the judicial system.


What Should You Do Now?

For now, businesses classified as “reporting companies” are not mandatorily required to submit BOI reports to FinCEN before the filing deadline until further actions are required. Business should:

1. Stay Informed: The government may appeal this decision, and the injunction could be lifted.
2. Prepare for Compliance: Use this time to identify beneficial owners and gather necessary documentation in case reporting requirements resume.
3. Consult with Legal Counsel: If you’re unsure whether your business is impacted, we can help clarify your responsibilities and any applicable exemptions.

What’s Next?

The federal government is expected to appeal the ruling, and the case may ultimately reach the U.S. Supreme Court. This means the legal status of the CTA could change again in the near future.


How We Can Help

We’re keeping a close eye on this evolving situation and are here to help you navigate the uncertainty. Whether you need clarity on your business’s classification or assistance preparing for potential compliance, don’t hesitate to reach out.

Email: contact@junwanglaw.com
Phone: 212-679-9700