Nationwide Injunction Halts Enforcement of the Corporate Transparency Act
December 6, 2024 – Client AlertUPDATE as of 12/7/2024: FinCen has updated their website addressing the recent federal court order, publicly stating that 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. Visit https://www.fincen.gov/boi for more information.
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On December 3, 2024, the U.S. District Court for the Eastern District of Texas issued a nationwide preliminary injunction halting enforcement of the Corporate Transparency Act (CTA). The ruling has significant implications for companies, beneficial owners, and those required to file reports under the CTA. The ruling prevents the federal government from implementing the CTA’s regulations at this time, including the requirement to file initial Beneficial Ownership Information (BOI) reports with the Financial Crimes Enforcement Network (FinCEN) for existing Reporting Companies by January 1, 2025.
The CTA, which went into effect on January 1, 2024, mandates that many businesses, including limited liability companies (LLCs) and corporations, provide detailed information about their beneficial owners and those with substantial control, including names, addresses, and identifying information. The deadline for initial BOI reports for companies in existence prior to 2024 was to be January 1, 2025.
Although the nationwide injunction means there is at least a temporary delay in the obligation to file BOI reports, it is just a preliminary order and enforcement could resume if the court’s order is overturned on appeal or if a higher court ultimately determines that the CTA is constitutional.
If the injunction is lifted, it is uncertain whether the compliance deadlines will be extended to account for the suspension period or whether they will remain unchanged.
Despite the preliminary injunction, FinCEN is still accepting BOI report filings. Given the uncertainty with the compliance deadline, non-exempt reporting companies that have not yet filed their initial BOI reports should either file their reports this month or continue to prepare by gathering the necessary information and documents for their BOI reports under the CTA. Staying updated and being prepared will enable prompt filing if and when the injunction is lifted.
On December 5, 2024, the federal government filed an appeal with the U.S. Court of Appeals for the Fifth Circuit to challenge the ruling. If the appeal is successful and the injunction is overturned, the obligation to file BOI reports would resume. However, the injunction could potentially be in place for a significant period of time depending on how the Court of Appeals decides to proceed.
We are available to assist with assessing how this ruling may impact your business and to guide you through any next steps based on the uncertain and evolving legal landscape. We will continue monitoring developments related to the CTA and will provide updates as new information becomes available.
