Texas federal judge issues nationwide injunction, suspends business ownership reporting requirements
The injunction comes less than a month before a major Corporate Transparency Act reporting deadline.
By Drew Viguet
National Agricultural Law Center
U of A System Division of Agriculture
Dec. 4, 2024
Fast facts:
- U.S. District Court in Texas issues a preliminary injunction against enforcement of the CTA
- Injunction issued Dec. 3
- Reporting requirement under CTA now on pause nationwide
(496 words)
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FAYETTEVILLE, Ark. — The deadline for millions of businesses across the country to report ownership information under the Corporate Transparency Act, or CTA — just weeks away — has been suspended.
The pause comes as the result of a court injunction issued Dec. 3, less than a month before a major CTA reporting deadline.
Established to combat financial crimes such as money laundering, the CTA was originally enacted in 2021 as part of the National Defense Authorization Act. Under the law, most corporations, limited liability companies, or LLCs, and similar entities are required to disclose their “beneficial owners” — individuals who own or control at least 25 percent of the business or exercise significant decision-making authority.
For businesses that existed before Jan. 1, 2024, the clock started ticking for submitting the required information with a deadline of Jan. 1, 2025.
The ruling by U.S. District Judge Amos Mazzant in the case Texas Top Cop Shop, Inc. v. Garland determined that the “CTA is likely unconstitutional as outside of Congress’s power. Because the Reporting Rule implements the CTA, it is likely unconstitutional for the same reasons.”
The ruling was not a final determination of the case itself, but was in response to a request for a preliminary injunction, where the court considered whether the plaintiffs demonstrated a substantial likelihood of success on the merits of their claims. The government may choose to appeal, although no statements have yet been made in response to the ruling. In the meantime, the injunction is in place nationwide.
The Texas case is not the first to challenge the constitutionality of the CTA. Earlier this year, a federal district court in Alabama ruled that the CTA was unconstitutional. Plaintiffs in that case were granted summary judgement, and CTA enforcement was suspended only for named parties in that case. This decision was appealed to the 11th Circuit Court of Appeals, which heard oral arguments in September.
“Several cases considering the constitutionality of the CTA are still pending, including the decision by the 11th Circuit Court of Appeals,” said Rusty Rumley, senior staff attorney for the National Agricultural Law Center. “While the court ruling in Alabama impacted specific parties, the preliminary injunction out of Texas applies nationwide.”
Rumley said that in speaking with stakeholders across the country this year, he found many were not aware of the CTA.
“If you operate a business entity such as an LLC, limited partnership or a corporation, developments with the CTA are definitely something to pay attention to because the penalties for non-compliance can be significant,” Rumley said. “The NALC will continue to closely follow and disseminate information about this issue and business owners should remain engaged.”
More background on the CTA is available on the NALC website, including a webinar from earlier this year and a factsheet. To keep up with the latest information about the CTA, follow the NALC on X, Facebook and LinkedIn.
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Media contact:
Drew Viguet
Communications & Special Projects Coordinator
National Agricultural Law Center
dviguet@uark.edu