Corporate Transparency Act Enforcement Stalled: What It Means for Businesses

Updated December 18, 2024: The U.S. government has filed a motion to stay the federal district court decision that temporarily halted the Corporate Transparency Act (CTA) filing requirements.  Congress has also released a bill that could delay the CTA filing for a year but the passage is not yet certain and could go down to the wire.  Given the uncertainty surrounding this decision and the potential reinstatement of the January 1, 2025 deadline, Redpath and Company recommends that entities subject to the CTA gather all necessary documentation to ensure timely filing if required. Redpath and Company will continue to monitor and provide updates on the CTA's status.

Enforcement of the Corporate Transparency Act (CTA) has hit a significant roadblock. The U.S. District Court for the Eastern District of Texas recently issued a preliminary injunction that halts the Department of Justice from enforcing the CTA.

Originally enacted in 2021, the CTA required businesses and certain legal entities to report beneficial ownership and managerial details to the Financial Crimes Enforcement Network (FinCEN). 

Plaintiffs in the case, led by the National Federation of Independent Business (NFIB), argued that compelling companies to report beneficial ownership details violates their Fourth and Fifth Amendment rights and oversteps the federal government’s powers.

This delay could have profound implications for small and medium-sized businesses across the country:

• Compliance is on hold, for now: For the moment, small business owners are not required to comply with the reporting obligations outlined in the CTA. This means there’s no immediate need to submit complex ownership disclosures to FinCEN.
• Potential short-term cost savings: The delay may also alleviate potential financial burdens associated with compliance. Postponing these costs allows businesses to focus on recovery and growth.
• Uncertainty remains: While the injunction provides temporary relief, it also leaves questions hanging in the air. The incoming Trump administration may seek to further limitations or restrictions for the CTA, or simply try to repeal or amend it.

Stay Vigilant

While enforcement of the CTA is on hold, it’s critical for businesses to be proactive rather than complacent. Here’s what you can do to stay prepared in case the legal landscape shifts again: 

• Stay updated: Watch for further updates related to the CTA, especially rulings from the Eastern District of Texas or higher courts.
• Assess your current ownership structure: If you haven’t recently reviewed your ownership plans, now is the time. If enforcement does resume, you’ll need to identify key individuals and entities that might need to be disclosed.
• Engage financial advisors: Redpath advisors can work with you to determine how potential compliance costs might impact your business. Proactive financial planning can help you prepare for any further changes. 

The preliminary injunction blocking the Corporate Transparency Act is a significant victory for small businesses—but it’s not the final chapter. Whether this law will be permanently struck down, amended, or eventually enforced remains uncertain. 

For businesses looking ahead, the takeaways here are clear: Preparation, adaptability, and expert consultation from Redpath will be your greatest assets in the face of evolving compliance requirements.