Important Update: Temporary Halt on Corporate Transparency Act Compliance

Update: December 9, 2024

On December 6, 2024, FinCEN filed a notice of appeal to the U.S. Court of Appeals for the Fifth Circuit of the district court’s decision in Texas Top Cop Shop, Inc., et al. v. Garland, et al., which granted the plaintiffs’ motion for a preliminary injunction against enforcement of the CTA.

On December 7, 2024, FinCEN issued a statement (FinCEN Alert: Impact of Ongoing Litigation), agreeing that reporting companies are not required to file at this time and won’t be subject to liability if they fail to file while the injunction remains in force, but can file voluntarily BOI if they desire.

Our advice to clients remains the same at this time: continue to gather BOI but do not file a report until the court lifts, dissolves or stays the injunction.

Original article:

On December 3, 2024, in deciding the case Texas Top Cop Shop, Inc., et al. v. Garland, et al., the U.S. District Court for the Eastern District of Texas found the Corporate Transparency Act (CTA) to be unconstitutional. The Court granted a nationwide preliminary injunction against the U.S. Department of Treasury Financial Crimes Enforcement Network (FinCEN), at least temporarily blocking it from enforcing the provisions of the CTA, which requires certain businesses to report beneficial ownership information (BOI) to FinCEN.

This is potentially good news for many businesses, as the January 1, 2025, deadline to file initial BOI reports with FinCEN was quickly approaching.

However, on December 4, 2024, FinCEN issued the following statement:

The Corporate Transparency Act (CTA) plays a vital role in protecting the U.S. financial system, as well as people across the country, from illicit finance threats like terrorist financing, drug trafficking, and money laundering.  We continue to believe—consistent with the conclusions of other federal courts—that the CTA is constitutional. Yesterday’s ruling is one of several cases pending before courts around the country, including ones in which district courts have denied requests to enjoin the CTA and that are now before courts of appeals. We are reviewing the ruling to determine our next steps. We would refer you to DOJ for any further information about the case.

We believe that in light of the preliminary injunction, filing a BOI report now is technically not required, but we expect that the injunction will eventually be lifted and that filing will, at some point, be required. As FinCEN determines whether it will appeal the Court’s ruling in this case (and we wait to see if an appellate court will review the Court’s decision prior to the January 1, 2025 initial reporting deadline), we are advising our clients that are not eligible for an exemption under the CTA to delay submitting their BOI to FinCEN at this time but to continue to gather their BOI in order to be in a position to submit their BOI by January 1, 2025, in the event the ruling is overturned or stayed.

We will keep a close eye on this decision as it works its way through the judicial system and promptly publish an update if our guidance changes.