BOI Reporting and Ongoing Updates
Nationwide Injunction Issued Against Corporate Transparency Act
The recent ruling by the U.S. District Court for the Eastern District of Texas granting a nationwide preliminary injunction against the Corporate Transparency Act (CTA) has temporarily halted the requirement for most businesses to file beneficial ownership information (BOI) reports with the Financial Crimes Enforcement Network (FinCEN). This decision follows earlier legal challenges to the CTA, with courts reaching varying conclusions on its constitutionality. While this injunction is in effect, businesses are not required to file BOI reports. However, given the ongoing legal proceedings and the possibility of the injunction being overturned, it is advisable for businesses to continue collecting the necessary data to be prepared for potential future filing requirements.
What We Know
On December 3, 2024, the U.S. District Court for the Eastern District of Texas issued an order granting a nationwide preliminary injunction that:
- Enjoins the Corporate Transparency Act (CTA), including enforcement of the statute and regulations implementing its BOI reporting requirements, and,
- Stays all deadlines to comply with the CTA’s reporting requirements.
FinCEN states on its website that it “continues to believe … that the CTA is constitutional,” but while the litigation is ongoing, it will comply with the order as long as it remains in effect.
“Therefore,” it adds, “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.”
This is the latest litigation related to the CTA. In two earlier cases, U.S. District Courts upheld the BOI reporting requirements. In another case, the CTA was ruled unconstitutional, but only the named plaintiffs and their members were allowed to ignore the BOI requirements while an appeal is pending. More than 30 million other businesses still needed to meet the January 1, 2025, deadline — until now.
What Brady Ware Recommends
Be aware that the ruling is preliminary, so it could be overturned or modified by future court decisions or legislation. FinCEN stated that businesses can continue to submit BOI reports voluntarily.
The American Institute of Certified Public Accountants (AICPA) also is encouraging companies to continue to collect BOI data despite the injunction. We agree with this course of action even though the regulations have been halted for the moment. AICPA noted that the while a preliminary injunction has been put in place nationwide by a U.S. district court, the Financial Crimes Enforcement Network has already filed its appeal and the rules could still be reinstated.
“While we do not know how the Fifth Circuit court will respond, the AIPCA continues to advise members that, at a minimum, those assisting clients with BOI report filings continue to gather the required information from their clients and [be] prepared to file the BOI report if the injunction is lifted,” AICPA Vice President of Tax Policy & Advocacy Melanie Lauridsen said in a statement.
As always, please reach out to us with any questions.
For more background and additional information on this court ruling and Beneficial Ownership Information (BOI), please visit: BOI Filings and Latest Court Ruling
Quick Takeaways: Corporate Transparency Act
1. What is the Corporate Transparency Act (CTA)?
Answer: The CTA is a federal law passed in 2021 that requires most businesses to report information about their beneficial owners (individuals who ultimately own or control the company) to the U.S. Department of the Treasury.
2. Why was the CTA challenged in court?
Answer: The CTA has been challenged on constitutional grounds, with some arguing that it violates the First Amendment right to free association and imposes excessive burdens on businesses.
3. What should businesses do now in light of the preliminary injunction?
Answer: While the injunction is in effect, businesses are not required to file BOI reports. However, it is advisable to continue collecting the necessary data to be prepared for potential future filing requirements, as the injunction could be overturned.
Questions?
Adam manages a variety of tax and accounting engagements for business clients in numerous industries, including manufacturing, real estate, construction, alternative investments, and professional services. He has experience in federal tax, multi-state corporate income and franchise tax, and municipal income tax. In addition to his tax compliance background, Adam specializes in preparing and managing complex partnership engagements.
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BOI Reporting: Another Court Ruling Halts Implementation – January 10
BOI Reporting Again On Hold After Injuction Previously Lifted – December 27, 2024
BOI Latest Court Rulings – December 5, 2024
Deadline Looming: Beneficial Ownership Information (BOI) – November 19, 2024
Corporate Transparency Act: What Businesses are Affected? – January 2, 2024
Corporate Transparency Act: Revised BOI Reporting Rules – January 3, 2024