A few weeks ago, we issued a reminder regarding the Beneficial Ownership Information (BOI) reporting requirements under the Corporate Transparency Act (CTA). That reminder listed important filing date information, including January 1, 2025 as the deadline for reporting entities to file if such entity was created before January 1, 2024.
This serves as an important update regarding this reporting requirement. On December 3, 2024, The United States District Court for the Eastern District of Texas granted a motion for preliminary injunction requested in a lawsuit filed by Texas Top Cop Shop, Inc., et al, against the federal government to halt the implementation of BOI regulations. While a preliminary injunction is currently in place, the Financial Crimes Enforcement Network (FinCen) has already filed its appeal and the rules could be reinstated.
What does this mean?
In short, this means that as of this moment, reporting entities are not required to file BOI with FinCen. Reporting companies may voluntarily submit the BOI reports. We are encouraging business owners to continue to collect the information required for the BOI filing and discuss with legal counsel what reporting responsibilities they may have in light of this recent decision and the pending appeal.
The following is an alert listed on the BOI homepage of the FinCen website:
Alert: Impact of Ongoing Litigation – Deadline Stay – Voluntary Submission Only
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.
The Corporate Transparency Act (CTA) plays a vital role in protecting the U.S. and international financial systems, as well as people across the country, from illicit finance threats like terrorist financing, drug trafficking, and money laundering. The CTA levels the playing field for tens of millions of law-abiding small businesses across the United States and makes it harder for bad actors to exploit loopholes in order to gain an unfair advantage.
On Tuesday, December 3, 2024, in the case of Texas Top Cop Shop, Inc., et al. v. Garland, et al., No. 4:24-cv-00478 (E.D. Tex.), a federal district court in the Eastern District of Texas, Sherman Division, issued an order granting a nationwide preliminary injunction that: (1) enjoins the CTA, including enforcement of that statute and regulations implementing its beneficial ownership information reporting requirements, and, specifically, (2) stays all deadlines to comply with the CTA’s reporting requirements. The Department of Justice, on behalf of the Department of the Treasury, filed a Notice of Appeal on December 5, 2024.
Texas Top Cop Shop is only one of several cases in which plaintiffs have challenged the CTA that are pending before courts around the country. Several district courts have denied requests to enjoin the CTA, ruling in favor of the Department of the Treasury. The government continues to believe—consistent with the conclusions of the U.S. District Courts for the Eastern District of Virginia and the District of Oregon—that the CTA is constitutional.
While this litigation is ongoing, FinCEN will comply with the order issued by the U.S. District Court for the Eastern District of Texas for as long as it remains in effect. Therefore, reporting companies are not currently required to file their beneficial ownership information with FinCEN and will not be subject to liability if they fail to do so while the preliminary injunction remains in effect. Nevertheless, reporting companies may continue to voluntarily submit beneficial ownership information reports.
For more information on the latest updates to BOI reporting requirements, contact us.
