Federal Judge Issues Nationwide Injunction Preventing Federal Government from Enforcing Corporate Transparency Act

On December 3, 2024, Judge Amos Mazzant of the U.S. District Court for the Eastern District of Texas issued a nationwide preliminary injunction, enjoining enforcement of the Corporate Transparency Act (CTA) and the Reporting Rules issued by the Financial Crimes Enforcement Network (FinCEN).

The CTA and the Reporting Rules would have required entities formed in the United States or qualified to do business in the United States to file certain information regarding their beneficial owners with the U.S. government. The Court issued the preliminary injunction on the grounds that the CTA is likely unconstitutional under the Tenth Amendment, which reserves powers not enumerated to Congress to the states. The Court stayed the compliance deadline of January 1, 2025 for any entity that would have been required to comply with the Reporting Rules by that date.

On December 6, 2024, the U.S. government filed a notice of appeal to the Fifth Circuit. Our Investment Funds & Advisers and Corporate lawyers are closely monitoring the case for any indication that the Fifth Circuit might overrule the district court and stay the preliminary injunction. However, given the Fifth Circuit’s composition and recent precedent decisions, it appears unlikely that such a stay will be granted.  

For more details regarding this legislation, see the latest Client Alert from our Investment Funds & Advisers and Corporate lawyers – Brian Forman, David LaGalia, Randi Mason, Tracy Sigal and Michael Wasenius.