This past January, we alerted our clients about the Corporate Transparency Act (CTA) here and here. Most of our clients received emails from us in the past two weeks reminding them of the January 1, 2025 filing deadline for filing beneficial ownership information (BOI).
On December 3, 2024, the U.S. District Court for the Eastern District of Texas issued a nationwide preliminary injunction in Texas Top Cop Shop, Inc., et al. v. Garland, et al., concluding that the CTA exceeds the U.S. Constitution’s limits on Congress’ power. Based on that conclusion and other reasoning, the court blocked the U.S. Department of Treasury and FinCEN from enforcing the CTA and its BOI reporting requirements. This decision applies to all reporting companies nationwide, including those that, until yesterday, were facing a January 1, 2025 filing deadline. A copy of the full order can be found here.
The court blocked not only CTA’s statutory provision (31 U.S.C. § 5336) but also its implementing regulation (31 C.F.R. § 1010.380). We are still waiting for FinCEN to weigh in publicly on the court action. However, for now, reporting companies are not legally required to comply with the BOI reporting requirements, including the January 1, 2025 deadline, until further court order.
Next Steps for Businesses:
- Stay Informed: This is a preliminary injunction, and subsequent rulings in this case or others could modify or overturn this order. Businesses should monitor developments. Similar to the decision in National Small Business United v. Yellen, in the U.S. Northern District of Alabama, the Justice Department may appeal the court’s order, but the outcome of that appeal, and whether that outcome will be the final word, remains to be seen. It is also possible the new administration will choose not to pursue an appeal.
- Evaluate Compliance Plans: While the nationwide preliminary injunction temporarily halts enforcement of the CTA, the uncertainty surrounding its ultimate fate means companies should be prepared to resume compliance efforts if the injunction is lifted. Some reporting companies may choose to proceed with compliance efforts despite the preliminary injunction, on the assumption that it could be modified or overturned any time. If the injunction is lifted, it is unclear how long reporting companies would have to then comply with the BOI reporting requirements and other obligations under the CTA.
- Consider Voluntary Filing the BOI by Year-End: Although not legally required while the preliminary injunction is in effect, some business owners may conclude that it is simply easier to just ignore the injunction and file their BOI information now while the FinCEN website is still accepting the information. Adopting this approach relieves the business of having to worry about the above steps. If the injunction stands for any reason, FinCEN will have your BOI information (and presumably will ultimately destroy it as improvidently collected), but many businesses are not bothered by that.