UPDATE 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.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
