On December 3, 2024, a United States District Court Judge in Texas issued a nationwide injunction against the federal government’s enforcement of the Corporate Transparency Act (“CTA”). The law, which mandates extensive new reporting requirements for over 35 million American businesses and other entities, was slated to take full effect in less than a month.
This decision follows a similar ruling from earlier this year, in which a federal judge in Alabama also barred the government from enforcing the CTA’s reporting requirements. However, the Alabama ruling was limited to the specific plaintiff in that case. The Texas court’s injunction is significantly broader in scope, largely due to the involvement of the National Federation of Independent Business (NFIB), which represents over 300,000 businesses nationwide, as a plaintiff.
With the January 1, 2025 deadline looming, many believed the CTA would proceed as planned. Consequently, millions of businesses preemptively filed their reports to avoid potential penalties, including jail time and substantial fines. This nationwide injunction now casts uncertainty over the CTA’s future.
The government is expected to appeal this ruling and is concurrently contesting challenges to the CTA’s enforcement in at least seven other jurisdictions. The expansive reach of the CTA, coupled with the potential for conflicting judicial opinions, will likely trigger further appeals and could ultimately result in an expedited review by the United States Supreme Court.
Businesses and other entities subject to the CTA’s provisions are advised to closely monitor these legal proceedings, as the final outcome will directly impact their reporting obligations.
This alert serves as a general summary and does not constitute legal guidance. Please contact us with any specific questions.
Robert D. Burgee is an attorney at Fraser Trebilcock with over a decade of experience counseling clients with a focus on corporate structures and compliance, licensing, contracts, regulatory compliance, mergers and acquisitions, and a host of other matters related to the operation of small and medium-sized businesses and non-profits. You can reach him at 517.377.0848 or at bburgee@fraserlawfirm.com.