On December 3, 2024, the U.S. District Court for the Eastern District of Texas issued a preliminary injunction in favor of the plaintiffs in the case of Texas Top Cop Shop, Inc. et al. vs. Garland.
In so ruling, “[t]he Court has determined that the CTA and Reporting Rule are likely unconstitutional for purposes of a preliminary injunction.
It has not made an affirmative finding that the CTA and Reporting Rule are contrary to law or that they amount to a violation of the Constitution.”
The Court Went Further And Ruled That This Is A
Nationwide Injunction, Applying Against Enforcement Of
The CTA And Its Impending January 1, 2025 Filing Deadline.
The Court stated: “…the CTA, 31 U.S.C. § 5336 is hereby enjoined. Enforcement of the Reporting Rule, 31 C.F.R. 1010.380 is also hereby enjoined, and the compliance deadline is stayed under § 705 of the APA. Neither may be enforced, and reporting companies need not comply with the CTA’s January 1, 2025, BOI reporting deadline pending further order of the Court.”
The CTA required that an estimated 32.6 million existing business entities disclose their beneficial owners to the Treasury Department’s Financial Crimes Enforcement Network before 2025. The government argued that the law’s function, to crack down on anonymous shell companies and deter money laundering, terrorism financing, and other illicit economic activity, falls within Congress’s regulatory duties.
But the CTA still fails to pass muster, even if anonymous corporate operations can be regulated by Congress, because the Constitution’s Commerce Clause can’t be leveraged to compel the disclosure of information for law enforcement purposes, the court’s opinion said.
We note this is a preliminary injunction, and we urge reporting companies to pay attention for additional updates and proceedings in this and other cases which could modify or change this order.
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Read more at: Tax Times blog
