Summary: A Texas district court issued a nationwide injunction against enforcing the Corporate Transparency Act, citing potential constitutional issues. Subsequent appellate rulings lifted and then reinstated the injunction, leaving CTA enforcement on hold. The law’s reporting requirements remain suspended while the AAO monitors legal developments and updates members accordingly.

Key Takeaways:

  • Multiple court actions have halted enforcement of the CTA nationwide, preventing FinCEN from imposing its reporting requirements.
  • The AAO is actively tracking legal outcomes to keep members informed of any future obligations or changes related to the CTA.

A series of injunctions against enforcement of the Corporate Transparency Act (CTA) are putting filing requirements for businesses on hold for the time being.

On Dec 3, 2024, the District Court for the Eastern District of Texas issued a nationwide injunction against the enforcement of the CTA. The court preliminarily found that the law was likely enacted without proper constitutional authority – specifically, that Congress may have exceeded its powers.

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

Following the injunction, a federal Court of Appeals decision on Dec 23, 2024 lifted the injunction, which would have re-initiated the filing requirement. However, on Dec 26, the Fifth Circuit Court of Appeals reinstated the preliminary injunction prohibiting the federal government from enforcing the CTA on a nationwide basis. The injunction therefore remains in place.

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Purpose of the CTA

The 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 Department of the Treasury.

AAO’s Ongoing Advocacy

The American Association of Orthodontists (AAO) stated that it will remain actively engaged in this issue through the AAO Legal and Advocacy team working closely with Cozen O’Connor Public Strategies in Washington, DC. The AAO will continue to monitor legal developments closely and will keep members informed of any changes that may affect their obligations under the CTA.

With injunctions in place and appeals pending, the immediate enforcement of the CTA’s reporting requirements remains on hold and the AAO will provide updates as the situation develops.