Texas Judge Lifts Injunction, Deadline Set for March 21

The Corporate Transparency Act (CTA) has found its teeth again — thanks to a U.S. District Court Judge in Texas.

Enforcement of a law meant to shine light into shell companies used in money laundering had been on hold due to an injunction issued by that same Judge last January. On Monday, however, Judge Jeremy Kernodle of the Eastern District of Texas reversed his order, responding to an appeal from the Justice Department. On Tuesday, U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN) announced that it’s giving most affected business owners until March 21 to comply with the law.

That notice from FinCEN had a conciliatory tone. It said companies may need another 30 days to comply with a law that requires farms and small businesses operating as corporations or LLCs to report the identities of their beneficial owners.

“…in keeping with Treasury’s commitment to reducing regulatory burden on businesses, during this 30-day period FinCEN will assess its options to further modify deadlines, while prioritizing reporting for those entities that pose the most significant national security risks.”

Later deadlines, for example, those granted to businesses in disaster areas, remain in effect.  

Read the FinCEN notice here.

This week’s ruling applies to one of two Texas lawsuits challenging the CTA — Smith v. U.S. Department of the Treasury. Until this week, Judge Kernodle had put a temporary nationwide stop to enforcement of the CTA. Late last year, the U.S. Supreme Court paved the way for enforcement of the CTA in another case: Texas Top Cop Shop, Inc., et al. v. Merrick Garland.

Not until Judge Kernodle lifted his own injunction this week could FinCEN enforce the law. 

Litigation in these cases isn’t over, so it’s advisable to stay up to date. These two university websites may be helpful: