On Dec. 3, in a win for ABC and its members, a federal judge in the U.S. District Court for the Eastern District of Texas issued a nationwide preliminary injunction against enforcement of the Corporate Transparency Act’s beneficial ownership information reporting requirements. 

In Texas Top Cop Shop, Inc., et al. v. Garland, et al. the judge determined that, because one of the plaintiffs, the National Federation of Independent Business, represents members nationwide, a nationwide injunction was necessary to provide relief to small businesses through the conclusion of legal proceedings. Prior to the court’s ruling, small businesses that met certain criteria would have had to file BOI reports with the U.S. Department of the Treasury by Jan. 1, 2025. 

“The ruling is a significant win for small business contractors around the country,” said Kristen Swearingen, ABC vice president of legislative & political affairs. “The CTA’s onerous reporting requirements would have significantly affected small business operations, forcing companies to dedicate time and resources or risk costly penalties. ABC applauds the court’s decision and will continue to promote a regulatory environment that protects America’s small business community.”

On March 1, 2024, a federal judge ruled that the CTA was unconstitutional after a 16-month legal battle led by the National Small Business Association and supported by the S-Corporation Associates of America and members of the Main Street Employers Coalition, including ABC. However, the court limited its decision only to the members of the NSBA. The Dec. 3 decision applies to companies nationwide and will remain in effect until the conclusion of legal proceedings, at which point the court may enter a permanent injunction. In the meantime, the government will likely appeal the preliminary injunction.

Background on the Corporate Transparency Act

On Jan. 1, 2021, Congress enacted into law the Corporate Transparency Act, which establishes a new framework for the reporting, maintenance and disclosure of beneficial ownership information in order to better enable critical national security, intelligence and law enforcement efforts to counter money laundering, the financing of terrorism and other illicit activity.

ABC, along with a coalition of small business organizations, submitted a letter to congressional leadership expressing concerns on the amendments incorporating the CTA into the 2021 National Defense Authorization Act, stating the enactment of the CTA would decrease privacy protections and slow the economic recovery of Main Street businesses.

ABC responded to Treasury’s Financial Crimes Enforcement Network notice of proposed rulemaking seeking public input on how best to implement the reporting requirements of the CTA, as well as the CTA’s provisions regarding FinCEN’s maintenance and disclosure of reported information in comments. ABC’s comments noted that the framework prescribed by the CTA will require millions of small businesses, including nearly every employer with 20 or fewer employees, to report to FinCEN certain personal information of their beneficial owners and update that information periodically throughout the life of the business.

ABC also argued that America’s small businesses—which make up most of ABC’s members—are typically not staffed or equipped to understand and comply with reporting obligations similar to those under the CTA. However, per the CTA, failure to comply can result in significant fines and imprisonment.