Videos
Every week, attorney Sean Bukowski reviews what is going in Austin, San Antonio, Dallas, and throughout Texas. Past topics have included:
- Property Tax Relief
- Austin’s Housing Problem
- Texas Regulations
- Emergency Funding
- Property Managers
The Corporate Transparency Act and the Texas Ruling: What Texas Businesses Need to Know.
What is the Corporate Transparency Act?
The CTA is a federal law that mandates specific businesses to report their beneficial ownership details to FinCEN. A beneficial owner is defined as an individual who owns or controls at least 25% of a company or exercises substantial control over it. This reporting requirement primarily targets small and medium-sized businesses, as larger publicly traded companies are generally exempt due to existing transparency obligations.
The primary goal of the CTA is to deter money laundering, terrorism financing, and other illicit financial activities by increasing visibility into the ownership structures of smaller entities. While this initiative has been hailed as a step toward greater accountability, it has also raised concerns about privacy, compliance burdens, and overreach—especially for businesses without substantial resources to navigate complex reporting requirements.
The Texas Court’s Decision
On December 3, 2024, the U.S. District Court for the Eastern District of Texas issued a nationwide preliminary injunction, effectively halting the enforcement of the CTA. The court found the act unconstitutional, arguing that it oversteps Congress's authority under both the Commerce Clause and the Necessary and Proper Clause of the Constitution.
Key Points of the Ruling:
Overreach on Interstate Commerce:
The court ruled that the CTA unjustly applies to businesses with no direct connection to interstate commerce or financial crimes, exceeding Congress's constitutional powers.
Burden on Small Businesses:
The decision emphasized that the reporting requirements place an undue burden on small businesses, which are less equipped to handle the administrative and financial complexities of compliance.
Legitimate Government Interest Lacking:
The court concluded that the CTA’s requirements lack a clear connection to a legitimate government interest, making them neither necessary nor proper for executing Congress's enumerated powers.
This ruling has suspended the BOIR requirements nationwide, bringing relief to many small businesses while also introducing legal ambiguity.
What Does This Mean for Texas Businesses?
For now, Texas businesses are not required to file a BOIR. However, the situation remains fluid, as the Department of Justice is expected to appeal the ruling. If the injunction is overturned, businesses could face retroactive compliance obligations. Here’s what Texas businesses should consider:
Monitor Legal Developments:
Stay updated on the appeal process and any subsequent rulings. A reversal of the Texas decision could reinstate the CTA requirements.
Evaluate Filing Now:
Some businesses may choose to file a BOIR voluntarily to avoid potential retroactive compliance issues if the ruling is overturned. Filing proactively ensures readiness and reduces future risk.
Assess Legal and Operational Implications:
Consult with legal counsel to understand how the ruling impacts your specific circumstances. Entities with complex ownership structures may need tailored advice.
The Broader Implications of the Ruling
The Texas court’s decision has sparked a broader debate about the balance between transparency and regulatory overreach. While the CTA aims to combat illegal financial activities, critics argue that its blanket approach unfairly targets legitimate businesses, imposing costs and administrative burdens without clear benefits.
For Small Businesses:
The ruling provides temporary relief from compliance costs and administrative tasks.
However, it also creates uncertainty, particularly for businesses planning to raise capital or engage in mergers and acquisitions, where ownership transparency is often scrutinized.[+] Show More
The Corporate Transparency Act and the Texas Ruling: What Texas Businesses Need to Know.
The Corporate Transparency Act (CTA) has been a hot topic in business law, particularly for small and medium-sized enterprises. ...
Can Lawyers Access Private Social Media Posts? How Social Media Discovery Works in Legal Situations.
Social media has transformed how we connect, communicate, and even do business. It’s a fantastic tool for breaking news, staying in ...
From Public Service to Private Practice: Casey Seeboth's Journey to Bukowski Law Firm
In this episode of Greater Texas, Sean conducts an interview with Casey Seeboth, a recent addition to the Bukowski Law Firm. They ...
Texas Stock Exchange: A New Challenger Emerges | The Future of Finance in Texas: The TXSE's Impact.
Have you heard about the exciting new development in the financial world? A group of investors is launching a brand-new stock exchange ...
Corporate Transparency Act (CTA): A Quick Guide to Compliance
Remember all the buzz about the Corporate Transparency Act (CTA) earlier this year? Well, it's time to dust off those notes because the ...
Austin & Dallas multifamily market comparison, trends analysis, and why Texas rents are decreasing.
Texas Multifamily Market: A Surprising Shift The Texas multifamily market has long been a beacon of growth and stability. However, ...
Categories
We will Guard Your Commercial Real Estate Investment
You can schedule a personal consultation with one of our attorneys to discuss your specific circumstances or issues you are facing as a real estate company.
To learn more, please contact us