By Craig Panholzer and Michael L. Salad
The Corporate Transparency Act (“CTA”), a federal law that became effective on January 1, 2024, purported to enhance transparency in company ownership, was approaching a critical January 1, 2025 deadline for most companies to disclose beneficial ownership information.
On December 3, 2024, the United States District Court for the Eastern District of Texas issued a preliminary injunction in favor of the plaintiffs in the case of Texas Top Cop Shop, Inc. v. Garland, et al, E.D. Tex., No. 4:24-cv-00478-ALM. In its ruling, the Court stated, “[t]he Court has determined that the CTA and Reporting Rule are likely unconstitutional for purposes of a preliminary injunction. It has not made an affirmative finding that the CTA and Reporting Rule are contrary to law or that they amount to a violation of the Constitution.”
In a previous Alabama ruling that held the CTA unconstitutional, the Financial Crimes Enforcement Network released a notice stating that it will comply with the court’s order as long as it remains in effect but clarified that the ruling only applied to the plaintiffs in that case. In the Texas Top Cop Shop case, the Court issued a nationwide injunction, stating, “reporting companies need not comply with the CTA’s January 1, 2025, [Beneficial Ownership Information] reporting deadline pending further order of the Court.” The United States Department of Justice recently appealed the Alabama ruling but has not stated whether it will appeal the Texas Top Cop Shop decision.
The ruling is a preliminary injunction. If you have not already complied with the CTA, you should consult with legal counsel and pay attention to future updates that may impact the Court’s order.
Craig Panholzer is an attorney in Cooper Levenson’s Business & Tax practice group in its Florida office. He concentrates his practice on business transactions, estate planning, special needs planning, probate and tax matters.
Michael L. Salad is an attorney in Cooper Levenson’s Business & Tax practice group. He concentrates his practice on estate and asset protection planning, special needs planning, business transactions, mergers and acquisitions and tax matters. Michael holds an LL.M. in Estate Planning and Elder Law. Michael is licensed to practice law in Florida, New Jersey, New York, Pennsylvania, Maryland, Connecticut, Georgia, Massachusetts, Alabama and the District of Columbia.