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On December 3, 2024, the United States District Court for the Eastern District of Texas issued a Memorandum Opinion and Order prohibiting the federal government from enforcing the Corporate Transparency Act (“CTA”) and its reporting rule nationwide.

More specifically, the Court held that the CTA is likely unconstitutional because it is outside of Congress’s power and not justified under the Commerce or Necessary and Proper Clauses of the United States Constitution.

What does this mean for you? It means that if you are a beneficial owner of a reporting company, you do not need to comply with the CTA’s January 1, 2025, beneficial owner information reporting deadline pending further order of the Texas District Court.

That said, because the Texas litigation is in its preliminary phases, while the CTA may be on its last breath, it is technically not dead yet. In fact, the Court was careful to state that while the CTA and its reporting rule are likely unconstitutional for purposes of issuing a nationwide preliminary injunction, the Court did not yet make any affirmative finding that the CTA or reporting rule are contrary to law or that they amount to a violation of the Constitution.

While this decision comes as good news for the millions of existing reporting companies that were facing the impending January 1, 2025 deadline, it is unlikely that we have heard the last on the matter. The federal government will almost certainly appeal this decision to the United States Court of Appeals for the Fifth Circuit, the same as it did in NSBU v. Yellen, No. 24-10736 (11^th Cir.), a case that we reported on earlier this year.

For now, and while we wait for a further decision from the Texas Court, business owners can hold off on reporting or alternatively make the decision to voluntarily report. If you decide not to report and the nationwide preliminary injunction is not made permanent, you will likely have to report at that later time.

We will continue monitoring developments in this area. In the meantime, please contact one of our attorneys with any questions you may have about the Texas Court’s Memorandum Opinion and Order or the CTA generally.