Client Alert: Memo on CTA Update
Date: December 4, 2024
On December 3, 2024, a federal court in Texas issued an Order imposing a preliminary injunction temporarily stopping the enforcement of the CTA and staying the requirement that reporting companies submit their reports by January 1, 2025. In Texas Top Cop Shop, Inc., et al. v. Garland, 4:24-CV-478, the Federal District Court for the Eastern District of Texas determined that there was a substantial likelihood that the plaintiffs in the case would prevail on the merits of their claims that the CTA is unconstitutional and that a nationwide injunction preventing enforcement of the CTA is necessary to prevent irreparable harm.
In its decision, the Court was careful to say that it is not deciding the ultimate issue of whether the CTA is unconstitutional, leaving open the possibility that the CTA will ultimately be found valid. For now, however, community associations and other companies subject to the CTA reporting requirements are not required to submit a report to FinCEN by January 1, 2025. They will not face penalties for not reporting until the Court makes a final decision or changes its injunction order.
Please note that this is only a temporary Order. This decision may be appealed, or the Court may later issue a final decision upholding the CTA, so community associations subject to the CTA will need to closely monitor any updates as the injunction may be dissolved and the CTA reporting requirements would then again be enforceable.
You may be aware that a federal court in Virginia recently refused to enjoin enforcement of the CTA as to community associations. Therefore, if the Texas federal court ruling is successfully appealed, all community associations that have not already filed may need to do so quickly. For this reason, community associations, particularly those that have already submitted information for the filing, may decide to complete their CTA filings now to avoid, in essence, a scramble to file should the Texas court’s decision be changed. Any information community associations have already collected from their beneficial owners should be maintained in a secure manner until such time as a final decision is issued on the enforceability of the CTA. Whiteford's Community Association's practice will provide information on any further updates as they become available.
The information contained here is not intended to provide legal advice or opinion and should not be acted upon without consulting an attorney. Counsel should not be selected based on advertising materials, and we recommend that you conduct further investigation when seeking legal representation.