By: William L. Bricker, Jr. and Juliya L. Ismailov
“Great nations, like great men [and women], should keep their word” (citing Justice Black’s dissent in Fed. Power Comm’n v. Tuscarora Indian Nation, 362 U.S. 99, 142 (1960), and “Ours is a written Constitution[,] the promises it makes to the People and the States alike are not hidden [and] [t]he Court must enforce them” - with these strong words, yesterday Judge Amos Mazzant of the US District Court in Eastern Texas halted the enforcement of the Corporate Transparency Act (“CTA”) in Texas Top Cop Shop, Inc., et al., v. Garland (Dec. 4, 2024).
While yesterday’s decision stayed the enforcement of the CTA based on the court’s finding of a likelihood of its unconstitutionality, the court will now proceed to weigh the positions of the plaintiffs and of the government to ultimately issue a ruling on whether the CTA should be struck down completely as unconstitutional.
The plaintiffs in Texas Top Cop Shop include a retailer of firearms and other equipment to first responders, a data communication company, a dairy farm, a national independent business association and the Libertarian Party of Mississippi.
The preliminary injunction will be in place until the court issues its final decision regarding the CTA’s constitutionality – that is, unless and until the injunction is overturned earlier on appeal by the government to either the Fifth Circuit, or directly to the Supreme Court.
The present injunction is a prohibition on the government from enforcing the CTA (enacted on January 1, 2021) and its implementing regulation (31 C.F.R. §1010.380) against any US entity to which the CTA might apply, including the enforcement of the filing deadlines and of any penalties for failure to comply with the CTA.
Most pressingly, the relevant deadline is January 1, 2025 for entities formed before January 1, 2024 to file their initial reports disclosing beneficial ownership information (“BOI”) to the US Department of the Treasury’s Financial Crimes Enforcement Network (“FinCEN”). Another deadline that will not be enforced is filing BOI within 90 days of an entity’s formation or first registration after Jan. 1, 2024, and within 30 days if formed or registered after Jan. 1, 2025.
To date the CTA has been challenged in multiple district and appellate courts with varying results. In September of this year an Oregon district court denied a request for a preliminary injunction in Firestone v. Yellen, No. 3:24-cv-01034 (D. Or. Sept. 20, 2024), and the plaintiffs’ appeal to the Ninth Circuit is pending. In March of this year an Alabama district court in Nat’l Small Bus. United v. Yellen, et al., Case No. 5:22-cv-01448-LCB (N.D. Ala. Mar. 1, 2024) held, in a narrowly applicable decision, that the CTA is unconstitutional only for the plaintiffs in that case – by contrast to the present injunction, which is applicable nationwide; the government’s appeal to the Ninth Circuit is pending.
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