A federal judge in Texas has issued a preliminary injunction halting enforcement of the Corporate Transparency Act nationwide. The Act required businesses to file beneficial ownership information – i.e., identifying information about the individual people who directly or indirectly own at least 25% of a company or exercise “substantial control” over the company – to the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN) by January 1.

  • Failure to comply would trigger civil penalties (up to roughly $600 per day) and criminal penalties (up to two years’ imprisonment and a fine of up to $10,000).
  • Both individuals and corporate entities could be held liable for “willful violations.”

A half dozen lawsuits seeking to overturn the requirement have been working their way through the courts this year, and two bills were introduced in Congress – one to repeal the rule and one intended to make filing easier – although neither has moved forward.

The injunction, issued December 3 by Judge Amos Mazzant of the U.S. District Court for the Eastern District of Texas, states that “reporting companies need not comply with the CTA’s January 1, 2025, BOI reporting deadline pending further order of the Court.”

Enforcement Halted – For Now

In this particular case, Texas Top Cop Shop v. Garland et al., the plaintiffs included a family-owned business, the Libertarian Party of Mississippi and National Federation of Independent Business. Their suit argued that the CTA infringes on First Amendment protections and violates privacy rights under the Fourth Amendment due to the required disclosure of personal information.

Writing for Forbes, trusts and estates attorney Matthew F. Erskine says Judge Mazzant “found that the act burdens businesses with significant compliance costs … without clear safeguards against misuse of collected data.”

It’s important to note that this is a preliminary injunction, not a ruling that definitively finds the CTA unconstitutional – although the judge’s 79-page decision says that “the CTA appears likely unconstitutional.” While an earlier decision in Alabama did find the CTA unconstitutional, the effect of that ruling was limited to the plaintiffs in that specific lawsuit.

In short, companies are off the hook for now, but the Justice Department may appeal to revive enforcement of the law. As Erskin writes, “Businesses would remain legally required to comply unless the law itself is repealed or permanently enjoined by the courts.” It remains to be seen if the incoming Trump administration chooses to scrap the rule altogether.

The Promo Perspective

While filing online was free, it wasn’t the easiest user experience, says Brian Grall, chief experience officer of Colorado-based distributor LogoMyBiz.com. and a member of PPAI’s Government Relations Action Council. He also can’t recall receiving confirmation documents and says he wonders if his online submission even went through.

“The allegedly easy-to-fill-out online form is glitchy,” says Grall, adding that it took him about an hour to complete because it wasn’t immediately clear which fields were required. “I had to go back several times [because it’s] not always easy to find which areas might’ve been incomplete or required.”

He adds that any action to remove red tape for small businesses – which comprises the vast majority of PPAI member companies – allows them more time and resources to create value for their customers.

“This court action in general is definitely a win for all small businesses everywhere, many of whom are branded merch clients,” Grall says.

Fellow GRAC member Mary Jo Tomasini, MAS+, president of CE Promo, the No. 92 distributor in the PPAI 100, says her company’s legal counsel encouraged her to let them handle the filing – for a price, of course. After careful consideration, she says, the company chose that option to ensure that the process would be handled correctly.

“We met with our counsel and paid for two hours of their time, and it was determined that we are just over the threshold of needing to report. Our attorney sent a summary in case we are ever questioned about it,” Tomasini says. “The potential for daily fines or penalties, if something were to be missed or incorrectly filed, far outweighs the upfront cost of legal assistance.”

Like Grall, she says the reporting requirement was overly burdensome and unlikely to achieve its intended outcome. “For small businesses like mine, the additional effort and expense involved were unreasonable and diverted resources away from our primary focus – serving our customers and growing our business,” Tomasini says. “Laws like this can have unintended consequences, disproportionately impacting smaller businesses while failing to deliver the anticipated benefits. It’s crucial to strike a balance that ensures accountability without imposing unnecessary hurdles on small business owners.“