December 26, 2024 UPDATE: On December 26rd, a merits panel on the Fifth Circuit Court of Appeals stayed the ruling that vacated the nationwide injunction against beneficial ownership information (BOI) reporting requirement. As such, the injunction against BOI reporting requirements is back in effect, meaning that BOI reporting is voluntary until further developments occur.
A preliminary injunction has been placed against the federal government's enforcement of the Corporate Transparency Act (CTA), thereby preventing enforcement of beneficial ownership information (BOI) filing requirements as administered by the Financial Crimes Enforcement Network (FinCEN). The injunction applies nationwide to any reporting companies that had otherwise been subject to deadlines under the CTA that were either on January 1, 2025 or 30 days after the entity's creation if the entity had been created after January 1, 2024.
On December 3rd, 2024, Judge Amos L. Mazzant, presiding over the United States District Court for the Eastern District of Texas, ruled in favor of six plaintiffs who had requested a preliminary injunction against CTA's reporting requirements as part of a broader lawsuit that set forth several constitutional challenges against the CTA. Texas Top Cop Shop, Inc., et al. v. Garland, et al., Case No 4:24-cv-478 at *79 (E.D. Tex.).
It is important to note that this ruling alone does not mean that the CTA and its BOI reporting requirements are per se unconstitutional. Instead, the judge ruled that, based on an initial reading of the case, the plaintiffs challenging the CTA presented a significant likelihood of success in their constitutional claims. The resulting implication is that the plaintiffs have shown a likelihood of winning on the merits but that subsequent developments in the lawsuit could result in CTA's required filings to be once again enforceable.
For the moment though, business owners who were otherwise required to file BOI reports with FinCEN can choose not to file such reports until further notice. While other lawsuits that are still ongoing in other courts provided more limited injunctions, this injunction has a nationwide effect.
As for the future of the CTA, Judge Mazzant was not a fan of the Act. Not only was the injunction granted, Judge Mazzant referred to the CTA as "flanking, quasi-Orwellian" and concluded that the defendants were "unable to provide the Court with any tenable theory that the CTA falls within Congress' power." Texas Top Cop Shop, Inc., et al. v. Garland, et al., Case No 4:24-cv-478 at *2 (E.D. Tex. Dec. 3, 2024). Noting the harsh penalties associated with non-compliance, the judge wrote that "[f]ailure to comply with the CTA is fraught with peril." Id. at *8. The judge concluded that the defendants were unlikely to prevail on their arguments that the CTA had any reasonable justification in either the Commerce Clause or the Necessary and Proper Clause, the latter of which the defendants tried unsuccessfully to pair with the Foreign Affairs Power and the Taxing Power. Id. at *73.
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More Information about CTA, BOI, and FinCEN
The following articles are included here in order to cover questions that might arise in the event that the injunction is lifted and BOI reporting requirements are reinstated.
Business Entities: New Federal Reporting Requirements for Small Businesses, Including Farms
FinCEN, BOI, CTA: What Does Any of This Stuff Mean?
FinCEN & BOI: Who Is a Beneficial Owner? What Must Beneficial Owners Report?
