On December 3, 2024, the U.S. District Court for the Eastern District of Texas issued a nationwide injunction against the enforcement of the Corporate Transparency Act. In doing so, the court preliminarily found that the law was likely enacted without proper constitutional authority – specifically, that Congress may have exceeded its powers.

The Corporate Transparency Act (CTA) aimed to prevent money laundering, illicit financial activities, corrupt practices, and terrorist financing. The law included a new requirement for businesses to disclose to the government personal information and photographs of persons with ownership and control over their business’ operating in the United States, by the end of 2024. Information was to be reported to the Beneficial Ownership Secure System of the Financial Crimes Enforcement Network (FinCEN), a bureau of the U.S. Department of the Treasury.

In response to the Texas court’s ruling, FinCEN stated that it will comply with the nationwide injunction. What this means for AAO members: Practically speaking, this means FinCEN will not enforce the CTA’s filing requirements while the injunction remains in place.

Background: The Ongoing Judicial Debate
On April 3, 2024, that the U.S. District Court for the Northern District of Alabama had ruled the Corporate Transparency Act (CTA) unconstitutional, enjoining enforcement of the law against the specific plaintiffs in that case. This was an early signal that the law, which originally took effect in 2021 as part of the National Defense Authorization Act, might face significant legal challenges.

These recent decisions are part of a broader, ongoing judicial debate. While the Alabama and Texas courts have ruled that the CTA is unconstitutional, federal courts in Oregon and Virginia have reached the opposite conclusion and upheld the law. Appeals have been filed by the Department of Justice (DOJ) in both the Alabama and the Texas cases, creating a patchwork of contradictory rulings that the appellate courts – and potentially the Supreme Court – will likely need to resolve.

Looking ahead, there may be additional shifts in the federal government’s approach. The DOJ is scheduled to undergo a leadership transition on January 20, 2025, under the incoming administration’s appointees. How this new leadership will address the ongoing appeals and challenges remains unknown.

It is worth noting that during the first term of President Donald Trump, the president vetoed the National Defense Authorization Act for Fiscal Year 2021 (NDAA) for several reasons, including his opposition to the CTA provision embedded within the NDAA. Although that veto was overridden by Congress, it underscores that the law’s legitimacy and enforcement have been ongoing matters of contention.

AAO Continues Monitoring the Issue
As an organization, we remain actively engaged in this issue through our AAO Legal & Advocacy team working closely with Cozen O’Connor Public Strategies in Washington, D.C. We continue to monitor legal developments closely and will keep our members informed of any changes that may affect their obligations under the CTA.

In addition to tracking the court cases and appeals, we are maintaining open lines of communication with lawmakers and regulators, ensuring that our members’ views and concerns are heard as this situation continues to evolve.

For now, with injunctions in place and appeals pending, the immediate enforcement of the CTA’s reporting requirements remains on hold. We will provide timely updates as the situation develops.