A Texas District Court has issued a nationwide injunction against the Corporate Transparency Act (CTA), pausing enforcement of the law that requires most small businesses to report ownership and applicant information to the federal government. The ruling comes just weeks before the Jan. 1, 2025, filing deadline.
The CTA, passed by Congress in 2021, mandates that reporting companies disclose identifying information about beneficial owners and company applicants. While there are 23 exemptions, the law applies to a majority of small businesses. The injunction stems from the case Texas Top Cop Shop, Inc., et al. v. Garland, et al., where plaintiffs argued that the law violates constitutional rights and could harm businesses.
The court found that the CTA “is likely unconstitutional as outside of Congress’s power,” stating that the law appears to regulate only “an entity’s existence.” It concluded that requiring businesses to submit such information could infringe on privacy rights and impose undue burdens.
“The court has effectively stripped the teeth out of the law,” said Andrew Corsberg, in-house counsel for Northwest Registered Agent, a business filing service. Corsberg cautioned that while the law’s enforcement is halted, it remains on the books. “The law still has gums,” he said, adding that businesses may eventually be required to comply if Congress amends the law or another court issues a conflicting ruling.
Critics of the CTA, including Northwest Registered Agent, argue that the reporting requirements are redundant. “The U.S. government already possesses business owners’ information through employer identification numbers (EINs) and tax returns,” the company said in a statement.
Despite the injunction, Northwest Registered Agent continues to offer a $9 service to assist businesses in filing their Beneficial Ownership Information (BOI) reports for those who prefer to comply proactively. The company said it will monitor developments and provide updates to business owners.
The court’s decision introduces uncertainty for businesses nationwide, as the CTA’s future remains unclear. If enforcement resumes, companies could face renewed compliance obligations.