On December 3, 2024, the U.S. District Court for the Eastern District of Texas issued a nationwide preliminary injunction temporarily halting the enforcement of certain reporting requirements under the Corporate Transparency Act (CTA). While this decision prevents the Financial Crimes Enforcement Network (FinCEN) from enforcing the filing of Beneficial Ownership Information Reports (BOIRs), effectively delaying compliance obligations for entities previously subject to the CTA’s year-end deadline, this is not a final ruling. FinCEN continues to believe the CTA is, in fact, constitutional, despite one district court judge’s decision and remains focused on elevating the reporting standards to prevent financial crimes.
The Department of Justice (DOJ) has appealed the decision, as seen in a similar case earlier this year (Northern District of Alabama), currently being reviewed in the 11th Circuit Court of Appeals. If overturned, the CTA’s reporting requirements will be reinstated.
Notably, other federal courts, including those in Oregon and Virginia, have upheld the CTA’s constitutionality, further supporting the likelihood of a DOJ appeal. Despite the preliminary injunction, FinCEN continues to accept BOIR filings as of December 4, 2024, and maintains its stance—consistent with other federal court decisions—that the CTA is lawful and constitutional.
The CTA aims to enhance financial transparency and combat illicit activities by requiring certain entities to disclose their beneficial ownership. In other words, to make it harder for the crooks (and some politicians) to move money around to try and hide their ill-gotten gains.
A ruling from the 5th circuit could come as soon as tomorrow (December 20th) and no later than December 27th (next Friday). It is expected that the court decision will narrow the injunction to the plaintiff group (only 300,000 businesses) or those mentioned, specifically on the case.
What this means for you:
This anticipated decision would reinstate the deadline of 1/1/25 for the rest of the tens of millions of reporting companies who have yet to file. Depending on the timing of the court verdict, there could be a huge need for reporting leading up to 1/1/25 and beyond for those who miss the deadline. We doubt the FinCEN will begin levying fines on Jan 2nd, though it will use the narrative of misconduct to its advantage to get businesses to comply.
The best non-legal advice would probably be to prepare and get it done with.
Below is the language that FinCEN has provided to companies that prepare these forms for you:
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. More information is available on FinCEN’s website at https://www.fincen.gov/boi
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