Corporate Transparency Act Update

Two recent developments have occurred with the Corporate Transparency Act (CTA).

**Hurricane Milton Relief**

The Financial Crimes Enforcement Network (FinCEN) has granted extensions to certain filing deadlines for victims of Hurricane Milton. For eligible victims of Hurricane Helene, beneficial ownership information (BOI) reports (initial or updated) due on or between October 4, 2024, and January 2, 2025, have been extended for six months from the original reporting date. This relief is applicable only to reporting companies having their principal places of business in designated areas by both the Federal Emergency Management Agency (FEMA) and the Internal Revenue Service (IRS) as qualifying for individual or public assistance and tax filing relief, respectively, due to Hurricane Milton.

The designated areas by FEMA for Hurricane Milton can be found here. The designated areas by the IRS for Hurricane Milton can be found here.

**Nationwide Injunction**

On December 3, 2024, the United States District Court for the Eastern District of Texas issued a nationwide preliminary injunction against the enforcement of the CTA. In its ruling in Texas Top Cop Shop, Inc. et al. v. Garland, the Court held that the CTA is likely unconstitutional and that reporting companies are not required to comply with the CTA’s January 1, 2025, BOI reporting deadline. 

This is the second federal district court to hold that the Corporate Transparency Act may be unconstitutional. In National Small Business United v. Yellen, the United States District Court for the Northern District of Alabama entered a final declaratory judgment, concluding that the Corporate Transparency Act was unconstitutional but limited its order to the plaintiffs in the case. Conversely, on September 20, 2024, the United States District Court for the District of Oregon denied a motion challenging the Corporate Transparency Act on constitutional grounds.

Thus, there are currently three federal district court cases pending that address the Corporate Transparency Act. The cases have thus far had different outcomes, all but ensuring that the matter will be considered by the United States Supreme Court.

For now, we recommend that reporting companies be prepared to file their BOI reports.  While the opinion of the United States District Court for the Eastern District of Texas purports to enjoin compliance with CTA nationwide, it is far from clear if the Court’s ruling will actually have that effect.  The case will most certainly be appealed by the government, which may ask for a stay from United States Court of Appeals for the Fifth Circuit or the Supreme Court of the United States.