Congress passed the Corporate Transparency Act (“CTA”) in 2021 with a stated goal to combat illicit activity including tax fraud, money laundering, and financing for terrorism by capturing ownership information for specific U.S. businesses operating in or accessing the country’s market. The CTA required most corporations and limited liability companies to file a Beneficial Ownership Report (“BOI Report”) with the Financial Crimes Enforcement Network (“FinCEN”) disclosing certain information about the owners and officers of the company. The CTA went into effect on January 1, 2024, with the initial deadline to file any needed BOI Report being January 1, 2025.
Several lawsuits have been filed across the country seeking to stop or limit the CTA’s requirements. Perhaps most notably on December 3, 2024, the federal court for the Eastern District of Texas in the case titled Texas Top Cop Shop, Inc. v. Garland (Case No. 4:24cv478), issued a nationwide preliminary injunction finding that the CTA and its regulations were unconstitutional. The preliminary injunction both enjoined the enforcement of the CTA and stayed the Reporting Rule pending further action in that court or after an appeal.
The effect of the finding is that the requirement to file a BOI Report by January 1, 2025, is stayed, at least temporarily. As of December 5, FinCEN’s website did not have any guidance for how those businesses with reporting requirements should react to the injunction. It is anticipated that the government will appeal the injunction and/or seek to terminate the injunction.
If you want to speak with one of our attorneys about whether you may need to file a BOI Report please contact us.
Prepared by Jackie Clowers, Attorney at Law