It is safe to say that the Federal Bench in Texas is at it again. Just a few months ago, the Northern District of Texas struck down the Federal Trade Commission’s nationwide ban on non-compete agreements just days before it was set to take effect. Ryan LLC v. Federal Trade Commission, No. 3:24–cv–986-E (N.D. Tex.). Now, on December 4, 2024, the Eastern District of Texas just issued a temporary injunction prohibiting the Federal Government from enforcing the Corporate Transparency Act (“CTA”) and its corresponding regulations. Texas Top Cop Shop, Inc., et al. v. Garland, et al., Case No. 4:24-cv-478 (E.D. Tex.)
Congress enacted the CTA to combat the use of corporate entities and shell-companies by bad actors looking to conceal their illicit activities. It generally requires companies to disclose certain identifying information about their business, the “applicant” who formed the entity, and the individual owners of the entity. Companies were required to file their report either (1) by January 1, 2025, for pre-existing entities formed before 2024, (2) within 90 days of their formation, for those formed in the year 2025, or (3) within 30 days, for entitles formed in 2025 and beyond.
Now, thanks to last week’s ruling, those reporting deadlines and the substantive reporting requirements themselves are all currently unenforceable nationwide. Texas Top Cop Shop, Inc., et al. v. Garland, et al., Case No. 4:24-cv-478 (E.D. Tex.). The government has already begun their appeal, but the Court’s decision will stand while they proceed. For now, businesses can still submit their reports voluntarily if they wish to play it safe.