By clicking “Accept”, you agree to the storing of cookies on your device to enhance site navigation, analyze site usage, and assist in our marketing efforts. View our Privacy Policy for more information.
On December 3,2024, the Federal District Court for the Eastern District of Texas issued a preliminary injunction temporarily suspending the enforcement of the CTA (Texas Top Cop Shop, Inc. v. Garland, E.D. Tex., No. 4:24-cv-00478, Mazzant, J.).This ruling comes less than one month before the January 1, 2025 filing deadline for those entities existing prior to January 1, 2024 and leaves filing entities without clear guidelines. The U.S. government filed an appeal of the ruling on December 5, 2024.
The CTA is intended to combat the use of shell entities to perpetrate money laundering and other financial crimes. It requires legal entities such as corporations, limited liability companies, and limited partnerships to identify their individual beneficial owners. Beneficial owners include those who own 25% or more of an entity, those who exercise significant control over an entity, and, for those entities formed after January 1, 2024, the identity of up to two company applicants (the individuals who actually file the formation documents creating the entity).
At present, the CTA and its filing deadlines are suspended and of no effect. In other words, for the time-being (and perhaps indefinitely), affected entities do not need to file.
Since the order is temporary, however, it is subject to appeal and reversal, either by the issuing court or an appellate court (in this instance, the U.S. Court of Appeals for the Fifth Circuit). Should the preliminary injunction be stayed or reversed the filing requirements will be reinstated. Depending on the timing of a potential stay or reversal, filing entities would likely be afforded some additional time to file, but how much and when that could happen is unknown.
Although there is presently no need to file, it is anyone’s guess whether and how long that might last. To avoid the vagaries of these legal unknowns, entities may still voluntarily file beneficial ownership information. Doing so ensures an entity that it has complied with the CTA’s requirements regardless of the outcome of the pending legal proceedings and will prevent the entity from being caught by surprise or short of time should the injunction be stayed or reversed. Even where entities choose not to file voluntarily, they would be wise to have filing information ready to submit pending new developments. Given the present lack of clarity with the CTA, the best option is to be prepared for any outcome.
_______________________
1 The information contained herein is intended as a general overview and should not be construed as legal advice. Readers should not act upon it without professional counsel and should seek advice applicable to their specific situation.
Disclaimer:
This presentation has been prepared by Market Street Trust Company. The views expressed herein represent opinions of Market Street and are presented for informational purposes only. They are not intended to be recommendations or investment advice and do not take into account the individual financial circumstances or objectives of the investor who receives them.
Certain statements included in this presentation constitute forward looking statements. Forward looking statements are not facts but reflect current thinking regarding future events or results. These forward looking statements are subject to risks that may result in actual results being materially different from current expectations.
Past performance (before and after taxes) does not guarantee future performance. There is no assurance that Market Street Trust Company investments will achieve their objectives, or that they will or are likely to achieve results comparable to results shown herein, or will make any profit, or will be able to avoid incurring losses. Exposure to foreign currencies may cause additional fluctuation in the value of any investment. Each investor must assess the suitability of an investment, the investor’s tolerance for risk and the impact on the investor’s diversification strategy. This presentation does not constitute an invitation to buy or an offer to sell securities, or any other products or services.
This is intended as general information only. Investors maybe required to meet certain criteria under the securities laws in order to qualify for certain investments. Any discussion of U.S. tax matters is not intended and cannot be used or relied upon for the purpose of avoiding U.S. tax-related penalties. Please visit our website for additional information concerning Market Street’s investments and investment updates. As always, please feel free to contact us if you would like to learn more about our investment program.
