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Over the course of the last year, we have notified you of the requirements of the recently enacted Corporate Transparency Act (“CTA”). This Client Alert is intended to report on recent developments regarding the CTA.
On December 3, 2024, the U.S. District Court for the Eastern District of Texas (the “Court”) granted a nationwide preliminary injunction that enjoins the federal government from enforcing the CTA. This means that neither the CTA nor the implementing rules adopted by the Treasury Department’s Financial Crimes Enforcement Network (“FinCEN”) may be enforced and that reporting companies need not comply with the CTA’s upcoming January 1, 2025 deadline for filing beneficial ownership information with FinCEN.
On December 5, 2024, the Government appealed the decision of the Court to the U.S. Court of Appeals for the Fifth Circuit and, as of the date of this Client Alert, this appeal remains undecided.
The Court’s order addressed the upcoming January 1, 2025 deadline for companies formed prior to January 1, 2024; however, it did not specifically address companies formed on or after January 1, 2024. As such, the Court’s preliminary injunction may not be applicable to entities newly formed in 2024.
On December 7, 2024, FinCEN issued a brief statement, stating that “reporting companies are not currently required to file beneficial ownership information with FinCEN and are not subject to liability if they fail to do so while the order remains in force.” FinCEN notes, though, that reporting companies may continue to voluntarily submit beneficial ownership information reports.
Importantly, the Court’s order is a preliminary injunction only and not a final decision. The Court’s order temporarily pauses enforcement of the CTA on a nationwide basis with respect to the January 1, 2025 deadline, but enforcement could resume if the Court’s order is overturned on appeal or the Government ultimately prevails on the merits. In those circumstances, your company may be required to meet the reporting requirements of the CTA.
GH&C will continue monitoring developments in this area. In the meantime, please contact an attorney in GH&C's Corporate Department with any questions you may have about the matter above or the CTA generally.
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