Court Pauses Corporate Transparency Act: What It Means for Small Businesses
- Marketing Director
- Dec 4, 2024
- 2 min read
A federal court in Texas has granted a preliminary injunction temporarily stopping the enforcement of the Corporate Transparency Act (CTA) and its Beneficial Ownership Information (BOI) reporting rule, citing constitutional and regulatory overreach concerns. The court's order highlights several key issues:
Unconstitutionality of the CTA: The court noted, "The CTA represents a federal attempt to monitor companies created under state law," which infringes on states’ rights and burdens businesses. The court also noted that the CTA does not fit within Congress's Commerce Clause power stating that "he fact that a company is a company does not knight Congress with some supreme power to regulate them in all aspects—especially through the CTA, which does not facially regulate commerce." Texas Top Cop Shop, Inc., et al v. Garland et al, Docket No. 4:24-cv-00478 (E.D. Tex. May 28, 2024), Court Docket
Compliance Costs: FinCEN estimated compliance would cost businesses $85 to $2,600 per report, with the court emphasizing that “compliance costs are precisely the types of concrete injuries” sufficient for legal challenges.
Privacy Concerns: The court described the law as a "quasi-Orwellian statute" requiring disclosure of sensitive ownership data, potentially violating privacy rights.
Plaintiffs argued the CTA's severe penalties and privacy invasions outweigh its benefits, and the court agreed that "irreparable harm" could result without intervention. The court agreed. "Just as the injunction against enforcement of the CTA should apply nationwide, a stay of the Reporting Rule should apply nationwide." This ruling temporarily puts a pause on the January 1, 2025, BOI reporting deadline, giving businesses a reprieve while legal proceedings continue. Stay informed as this pivotal case unfolds. If you have questions about how this ruling impacts your obligations, we’re here to help! Attorney Austin Warehime EQUES® Law Group www.eques.law
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