A recent ruling by the U.S. District Court for the Eastern District of Texas has significant implications for the Corporate Transparency Act (CTA) and its beneficial ownership information reporting requirements. How does this impact investors who were required to report by the end of the year?
On December 3, 2024, Judge Amos Mazzant issued a nationwide preliminary injunction halting the enforcement of the Corporate Transparency Act. The court determined that the CTA likely exceeds constitutional boundaries by infringing on states’ rights under the 10th Amendment. The key word here is “likely”. This is not the final word on the matter. The injunction temporarily suspends the requirement for businesses to report beneficial ownership information to the Treasury, which had a deadline of January 1, 2025. However, until appeals are resolved, that deadline will be delayed.
In the meantime, entities are not obligated to comply with the CTA’s reporting requirements. The future of this ruling remains uncertain, as the U.S. Department of Justice is almost certain to appeal the decision. The CTA is an important law in the fight against money laundering, and the United States has been a global leader in this effort. For this reason, higher courts—including appellate courts and potentially even the U.S. Supreme Court—will likely review this case.
The outcome will hinge on judicial interpretations of federal authority versus states’ rights and the constitutional validity of the CTA. In a worst-case scenario for the law, the CTA could be overturned and subsequently modified to address constitutional concerns and pass judicial review. That said, I don’t believe this marks the end of the CTA—it’s more of a delay than a termination. Anything is possible, but this seems like a case of kicking the can down the road rather than shutting it down completely.
If you have additional questions or need further information, please reach out to us, your CPA, or your attorney. We wish you the best of investing success. Thank you.
