Corporate Transparency Act (CTA) Enjoined and Stay Issued

Beneficial Ownership Interest (BOI) Reporting is now on hold.

In an early November article, I wrote about the CTA and how BOI (Beneficial Ownership Interest) reporting was required by many entities by January 1, 2025.

A court ruling last week found the CTA unconstitutional, paving the way for an appeal by the Department of Justice and FinCEN.

In a statement issued by FinCEN over the weekend, FinCEN announced that it will comply with the order issued by the District Court in the Texas Top Cop Shop case “so long as it is in effect.” Therefore, reporting companies are not currently required to file their beneficial ownership information with FinCEN and will not be liable if they fail to do so “while the preliminary injunction remains in effect.”

FinCEN also disclosed that the Department of Justice filed a Notice of Appeal on December 5, 2024, and reminded the public that voluntary compliance with the CTA reporting requirements can continue.

We do not know what will happen on appeal, although we think it’s unlikely that the initial required filing date for January 1, 2025, will stand. Similarly, the filing deadlines applicable to newly formed reporting companies are also on hold while the injunction is applicable.

However, if you formed a new company and the reporting deadline was imminent when the stay was issued, it is probably prudent to ensure that you have all the information necessary to file a BOI immediately if the injunction is lifted with no change in requirements, in case additional time to file is not granted. FinCEN’s seeming emphasis on the fact that enforcement of the CTA is stayed “so long as the order is in effect” may indicate that the government does not intend to grant additional time to file.

Thus, for instance, it is possible that if a decision to lift or vacate the injunction is made on or after January 2, 2025, all reporting companies with a January 1 reporting deadline would need to file immediately. Although it does seem likely that additional time to file would be granted upon the possible lifting of the stay, it may well be that such additional time may not be lengthy, given that existing reporting companies have had almost an entire year to report before the preliminary injunction is granted.

As such, until and unless FinCEN indicates that an extension of time to file will be granted, it is prudent that all information necessary for reporting is gathered and ready to file if you do not wish to file voluntarily by your original deadline.

The decision about whether to file voluntarily may be a difficult one. On one hand, it ensures that if the injunction is vacated and there is a need to file quickly, you will already be in compliance. On the other, many may not want their information submitted to the government if there is no requirement to do so (and some may not want to pay for professional help to file their BOI report(s).)

If you are unsure what to do, please check with your entity’s attorney or CPA for the latest information about your situation if you have not yet filed a BOI report and are required to do so by the CTA.

Source: InterActive Legal