What happened?

On December 3, 2024, a federal district court in Texas found the Corporate Transparency Act (the “CTA”) to be unconstitutional and issued a nation-wide order to ban it. The case before the court was Texas Top Cop Shop, Inc., et al. v. Garland, et. al, Case No. 4:24-cv-478 (E.D. Tex.). This means that companies do not need to comply with the CTA’s reporting deadlines.

What is the Corporate Transparency Act?

The CTA would have required the vast majority of companies in the U.S. to report details about company ownership to the federal government. More information about the CTA requirements can be found at this KEW Tip: The Corporate Transparency Act.

What did the Texas district court find?

The Texas district court granted a preliminary injunction nationwide, stating that neither the CTA nor any related regulations may be enforced. The court took issue with the CTA’s attempt to “monitor companies created under state law” finding that this is a matter left directly to the states, and calling the practice “quasi-Orwellian.” The court found that the requirement to comply with the CTA significantly burdensome from a time perspective, and to interfere with privacy rights.

What next?

This is just a preliminary injunction which means all CTA requirements are currently on pause, pending the final outcome of the case. It’s uncertain when, exactly, that might be. It is possible that the federal government will immediately appeal this decision to the Fifth Circuit, and a further appeal could be taken to the Supreme Court.

What do I need to do?

Nothing; no need to report at this time until the courts court this out and provide additional guidance.

Wasn’t there some other block?

Sound familiar? A Texas court issued a nation-wide ban blocking a Federal Trade Commission non-compete ban earlier this year. For more information, read the following KEW Tip: Last-Minute Ruling Saves Non-Competes.

Questions?

Contact Kramer, Elkins & Watt, LLC by calling 608-709-7115 or emailing info@kewlaw.com.