Yesterday afternoon, December 3, 2024, Federal District Court Judge Amos Mazzant, Eastern District of Texas, Sherman Division, issued a Memorandum Opinion, TEXAS TOP SHOP, INC., ET AL. v. MERRICK GARLAND, ATTORNEY GENERAL OF THE UNITED STATES, ET AL., in which it found the Corporate Transparency Act (“CTA”) and the underlying reporting rules of the CTA “likely unconstitutional.” As relief for the multiple Plaintiffs who brought the action, the Court imposed a Preliminary Injunction enjoining the CTA itself and enforcement of the reporting rules under the CTA. The Court imposed the Injunction on a NATIONWIDE basis, stating “Just as the injunction against the enforcement of the CTA should apply nationwide, a stay of the Reporting Rule should apply nationwide.” The CTA itself, and the Reporting Rule of FinCen, are both enjoined and the compliance deadline of January 1, 2025, is stayed, with the Court ordering “Neither may be enforced and reporting companies need not comply with the CTA’s January 1, 2025. BOI reporting deadline pending further order of the Court.”

This is not the only case in the nation challenging the CTA, and it isn’t the first Court to either find or suggest it will find, the CTA unconstitutional. It is the first, however, to purport to impose a NATIONWIDE injunction and stay on CTA reporting and enforcement – so these are unchartered waters. This ruling comes in the 11th hour with a pending deadline of January 1, 2025, for Reporting Companies created prior to January 1, 2024, to report information regarding itself and its Beneficial Owners. Notably, the Court only specifically addressed the January 1, 2025, deadline and did not reference reports due for Reporting Companies formed on or after January 1, 2024, and prior to January 1, 2025, which have a reporting deadline of 90 days following creation of the Reporting Company.

An appeal by the government, interim motions by the government to lift (remove) the stay on reporting (meaning reporting deadlines are back where they were before yesterday), and guidance from FinCen, whether providing penalty relief or otherwise while this litigation proceeds are all possibilities – but they are just that – possibilities with uncertain timing. We will be monitoring Court and FinCen activity daily. A NOTICE OF APPEAL WAS FILED BY THE GOVERNMENT ON DECEMBER 5, 2024……FINCEN INDICATES A RELEASE IS FORTHCOMING BUT THEY ARE BEING MEASURED IN BOTH THEIR RESPONSE AND ITS TIMING…… Where does that leave us? Our counsel:

It would appear, FOR THE MOMENT, that there is a consensus that the CTA and the Reporting Rule are enjoined NATIONWIDE, and the January 1, 2025, deadline for a BOI Report of a Reporting Company formed BEFORE January 1, 2024, is STAYED (indefinitely pending further Court Order).

-Nothing prevents you from currently completing and filing the BOI Report; however, the following are current options you may consider in making your decision on how to proceed;

-If your FinCen filing has yet to be started, TEMPORARILY put on the brakes and await further guidance, being sure to watch for updates this month from Frazer Ryan;

-If your FinCen filing is ready to file or in process with some of the preparation work already complete, you should consult with your Frazer Ryan attorney to discuss whether to hold off or move forward with filing;

-If your Reporting Company was created on or after January 1, 2024, you should proceed with the understanding that your BOI Report is due within 90 days of the date of creation of the Reporting Company (as this deadline was not specifically addressed by the Court);

-If your BOI Report has already been filed and changes have occurred which would require an updated BOI Report within 30 days of the Change, you should proceed with the understanding that the updated BOI Report continues to be due within 30 days of the change which precipitates the updated BOI Report.
We will continue to monitor and update as activity warrants. Please contact your attorney at Frazer Ryan to address any questions you may have.

Gary Fletcher is an attorney/CPA, a Fellow of the American College of Trust and Estate Counsel (ACTEC), and a senior partner in the law firm of Frazer Ryan Goldberg and Arnold, LLP, a firm with a 35-year history in its principal office in Phoenix, and having opened its Tucson office on September 1, 2024, by absorbing the Tucson law firm of Nystedt & Fletcher PLLC.