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Federal Court Halts Corporate Transparency Act Enforcement Nationwide

Federal Court Halts Corporate Transparency Act Enforcement Nationwide

On December 3, 2024, the U.S. District Court for the Eastern District of Texas issued a nationwide preliminary injunction temporarily halting the enforcement of the Corporate Transparency Act (CTA) and its Beneficial Ownership Information (BOI) reporting obligations. This injunction significantly impacts millions of U.S. businesses.

Immediate Impact on Businesses

The court’s decision provides immediate relief to approximately 30 million entities that were previously required to submit beneficial ownership reports. Specifically:

  • Entities formed before 2024 are no longer required to meet the January 1, 2025, filing deadline.

  • Entities established in 2024 are currently exempt from their original 90-day filing requirement.

Current Legal Status

This preliminary injunction is temporary, not final, pending further legal review. The federal government has appealed the ruling to the Fifth Circuit Court of Appeals. A successful appeal by the government could reinstate the reporting requirements quickly, possibly with limited preparation time for compliance.

Implications for Business Owners

Currently, all businesses nationwide are temporarily relieved from CTA reporting obligations, affecting:

  • Corporations

  • Limited Liability Companies (LLCs)

  • Other entities formed through state filings

  • Businesses with 20 or fewer employees

However, business owners should remain vigilant and prepared. The injunction’s temporary nature means requirements could resume swiftly if the appeal is successful.

Overview of CTA Requirements

The Corporate Transparency Act was enacted to enhance financial transparency and combat illicit activities such as money laundering and terrorism financing. Prior to the injunction, the CTA mandated:

  • For entities created in 2024, filing beneficial ownership reports within 90 days of formation.

  • For entities formed before 2024, filing by January 1, 2025.

Penalties Under the Original CTA

Before the court’s injunction, penalties for failing to comply with the CTA were severe:

  • Civil Penalties: Fines of $500 per day up to a maximum of $10,000 for ongoing violations.

  • Criminal Penalties: Imprisonment of up to two years and fines up to $10,000 for intentional non-compliance.

Compliance Challenges

The CTA originally required businesses to notify the Financial Crimes Enforcement Network (FinCEN) within 30 days of any beneficial ownership changes, placing considerable compliance burdens on business owners.

Stay Prepared and Informed

While the current injunction offers temporary relief, the legal situation is fluid. To navigate these regulatory changes and ensure your business remains compliant, reach out to Harvey Norman Law. Our team specializes in business compliance and formation, providing expert legal guidance tailored to your needs.

For assistance with CTA compliance or other legal matters, contact Harvey Norman Law at admin@harveynormanlaw.com. Our firm is committed to helping you manage regulatory complexities, ensuring your business is protected and fully compliant.