Last updated: December 9, 2024
On December 3, 2024, the U.S. District Court for the Eastern District of Texas issued a nationwide preliminary injunction halting the enforcement of the Corporate Transparency Act (CTA) and its accompanying Beneficial Ownership Information (BOI) reporting requirements. This ruling in Texas Top Cop Shop v. Garland found the CTA likely unconstitutional, citing overreach of congressional authority and significant potential harm to businesses across the nation.
The ruling temporarily relieves reporting companies from the January 1, 2025, compliance deadline, but it also introduces uncertainty. Late on December 6, 2024, the Financial Crimes Enforcement Network (FinCEN) released this statement on its website:
In light of a recent federal court order, reporting companies are not currently required to file beneficial ownership information with FinCEN and are not subject to liability if they fail to do so while the order remains in force. However, reporting companies may continue to voluntarily submit beneficial ownership information reports.
While this guidance clarifies the current state of reporting obligations, FinCEN has not yet released any guidance regarding how deadlines would be reinstated if the injunction were lifted. This ongoing uncertainty emphasizes the importance of staying informed and prepared.
While the legal process unfolds, businesses are advised to proceed cautiously. Many industry leaders, including the American Institute of Certified Public Accountants (AICPA), recommend continuing preparations as though the injunction could be lifted at any time. This includes gathering the necessary documentation and being prepared to file BOI reports promptly if reporting requirements are reinstated.
Our Recommendation:
Given the evolving nature of this legal matter, we recommend that everyone:
We are closely monitoring this situation and will provide updates as FinCEN and the courts clarify the path forward. Clients should reach out to our team for assistance with their compliance needs.
Litigation Update:
The Department of Justice filed a notice of appeal with the U.S. Court of Appeals for the Fifth Circuit on December 5, 2024, signaling that the Attorney General, DOJ, and Treasury Department will continue to defend the constitutionality of the CTA. Meanwhile, several other cases challenging the CTA are pending across the country, with mixed rulings. District courts in both the Eastern District of Virginia and the District of Oregon have upheld the constitutionality of the CTA. In contrast, the District Court for the Northern District of Alabama’s decision in National Small Business Association v. Yellen, which held the CTA unconstitutional, is currently being appealed in the U.S. Court of Appeals for the Eleventh Circuit.
Adding to the uncertainty, President-Elect Donald J. Trump initially vetoed the CTA during his first term when it was included in the National Defense Authorization Act (NDAA, H.R. 6395). However, Congress overrode the veto with a two-thirds majority vote. While the NDAA veto encompassed broader concerns, how the incoming administration will approach the CTA after January 20, 2025, remains to be seen.
This landscape underscores the complexity and evolving nature of the legal and political challenges surrounding the CTA.
Contact Us:
If you have questions about the CTA, BOI reporting, or the implications of this ruling, contact us at jfcta@jonesfoster.com.
The information provided in this article does not, and is not intended to, constitute legal advice; it is for general informational purposes only. No reader of this article should act or refrain from acting on the basis of this information without first seeking legal advice from counsel in the relevant jurisdiction to ensure the information contained herein – and your interpretation of it – is applicable or appropriate to your particular situation.
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