On December 3, 2024, the U.S. District Court for the Eastern District of Texas issued a nationwide preliminary injunction against the enforcement of the Corporate Transparency Act (CTA) and its implementing regulations. This decision came in response to a lawsuit filed by Texas Top Cop Shop, Inc., the National Federation of Independent Business, and other plaintiffs. The court ruled that the CTA and its beneficial ownership reporting rule are likely unconstitutional, citing concerns about privacy, freedom of association, and states’ rights.
What This Means for FinCEN BOI Reporting
The CTA, which took effect on January 1, 2024, requires companies to report beneficial ownership information (BOI) to the Financial Crimes Enforcement Network (FinCEN) by January 1, 2025. However, due to the injunction, reporting companies are not currently required to file their BOI reports. FinCEN has stated that it will comply with the court order and will not enforce the reporting requirements while the injunction is in effect.
Implications for Companies
- Pause on Reporting: Companies are not obligated to file BOI reports at this time. However, they should continue to gather the necessary information in case the injunction is lifted or overturned.
- Voluntary Reporting: Companies may choose to submit BOI reports voluntarily, but they should consult with legal counsel to assess the risks and benefits of doing so.
- Monitoring Developments: Companies should closely monitor the ongoing litigation and be prepared to comply with the reporting requirements if the injunction is stayed or lifted.
Under Appeal
The Government has submitted an emergency motion for appeal to the 5th Circuit Court of Appeals and a decision isn’t expected until just days before the January 1, 2025 deadline.
Conclusion
The nationwide injunction against the CTA introduces significant uncertainty for companies required to report BOI to FinCEN. While the injunction is in effect, companies are not penalized for non-compliance. Nonetheless, the injunction is under already appeal, so companies and their owners should remain vigilant and prepared for potential changes.
More Information
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Disclaimer
ALG does not make any representations or warranties, expressed or implied, as to the accuracy, completeness or fitness for a particular purpose of this or any article. This article is meant for general informational purposes only and should not be construed as, and does not constitute, legal advice. No one should take any action regarding the information in this article without first seeking the advice of an attorney. This article does not create an attorney-client relationship. No attorney-client relationship will exist with ALG or any attorney affiliated with it unless a written contract is signed by all parties and any conditions in such contract are satisfied.
