Most U.S. legal entities are required to comply with the Corporate Transparency Act (CTA) by reporting their beneficial ownership information (BOI) to the Financial Crimes Enforcement Network (FinCEN). This requirement applies unless the entity qualifies for one of the limited exemptions. Under the CTA, reporting companies have until January 1, 2025, to file their BOI reports. Failing to meet this deadline—or to amend or correct inaccurate reports—can result in civil or criminal penalties.

However, a federal court ruling on December 3, 2024, has disrupted this requirement. U.S. District Judge Amos Mazzant of the Eastern District of Texas issued an injunction that temporarily blocks the enforcement of the CTA and its BOI Reporting Rule. This decision has paused the January 1, 2025, compliance deadline and left the future of these reporting obligations uncertain.

Key Elements of the Court’s Ruling

Judge Mazzant’s order states the following:

• The CTA (31 U.S.C. § 5336) is enjoined.

• The BOI Reporting Rule (31 C.F.R. 1010.380) is also enjoined.

• The January 1, 2025, deadline is stayed.

• Enforcement of the CTA and BOI Reporting Rule is prohibited until further notice.

• Reporting companies are not currently required to comply with the BOI reporting deadline.

The Court’s Reasoning

The decision centers on the constitutional limits of congressional authority. Judge Mazzant ruled that Congress overstepped its powers by enacting the CTA. Specifically, he argued that the U.S. Constitution does not grant Congress a general authority to regulate all aspects of public life. The judge found no justification for the CTA under either the Commerce Clause or the Necessary and Proper Clause of the Constitution.

According to the ruling, upholding the CTA would require an unprecedented expansion of Congress’s commerce power. Judge Mazzant also dismissed arguments that the CTA is justified by Congress’s authority to regulate commerce, address foreign affairs, enhance national security, or levy taxes. While the judge has not made a final determination on whether the CTA is unconstitutional, he found it likely enough to grant a preliminary injunction.

Nationwide Impact of the Injunction

Judge Mazzant extended the injunction to apply nationwide, citing the broad scope of the CTA and BOI Reporting Rule, which affect approximately 32.6 million reporting companies. The judge reasoned that a national injunction was necessary to address the widespread constitutional issues raised by the plaintiffs, who represent a broad membership across the United States.

What’s Next for Reporting Companies?

The U.S. Department of Justice (DOJ) may appeal this decision to the Fifth Circuit Court of Appeals, which handles cases from the Eastern District of Texas. In the meantime, the BOI reporting requirements and the January 1, 2025, deadline are suspended. Companies affected by the CTA should stay updated on developments in this case, including:

• Whether the DOJ or FinCEN issues a public response or position statement.

• The likelihood of an appeal by the DOJ to reinstate the BOI reporting rule.

• Any court decisions that could reverse or uphold Judge Mazzant’s injunction.

For now, the enforcement of BOI reporting obligations is on hold, but businesses should remain prepared for potential changes as the legal process unfolds.

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