A major government reporting requirement for small businesses got held up in court. Here’s what to do next.

Herrick partner, Mark A. Limardo, spoke with The Philadelphia Inquirer about how businesses should handle reporting owner information now that the Corporate Transparency Act (CTA) is in limbo. According to the article, the U.S. District Court for the Eastern District of Texas issued a preliminary injunction suspending enforcement of the CTA because the reporting requirements “exceed Congress’s power, and violate First and Fourth Amendment protections.” The article further notes that enforcement of the act is halted nationwide, and for now, businesses are no longer required to meet the January 1, 2025 deadline to file. 

The article highlighted that the court found that the CTA's reporting requirements "exceed Congress’s power, and violate First and Fourth Amendment protections." Mark explained that "as a pure legal matter," the decision clearly renders the act universally unenforceable as long as the preliminary injunction remains in place.

If the government’s appeal is successful, Mark said, "a company that stopped working on its compliance may be unable to restart and finish in time to meet the Jan. 1 filing deadline." But, Mark added, the appeals court or government could choose to grant a grace period because of the injunction.

Mark noted that a company should consider continuing its compliance, up to and just short of any filing. "This way, if the injunction is lifted without any grace period, the company should be well-positioned to meet a short filing deadline," he concluded.

Read the full article in The Philadelphia Inquirer here. Access may require a subscription. 

For more guidance about what to consider in the interim, you can visit our Corporate Transparency Act Resource Center.