Nationwide Injunction Blocks Enforcement of Corporate Transparency Act Reporting Obligations

On December 3, 2024, the U.S. District Court, Eastern District of Texas issued a nationwide preliminary injunction to block enforcement of the Corporate Transparency Act’s (CTA) reporting obligations. The court concluded the CTA is likely void and outside Congress’s enumerated powers, so therefore unconstitutional. The injunction halts (at least temporarily) the January 1, 2025 compliance deadline for covered entities to report Beneficial Ownership Information (BOI) to the U.S. Financial Crimes Enforcement Network (FinCEN). FinCEN has confirmed that reporting companies will not be required to file BOI reports and will have no liability for failing to do so while the CTA injunction is in effect. FinCEN will continue to accept BOI reports on a voluntary basis.

Background

In 2021, Congress passed the CTA to curb illicit financial activities such as tax evasion, money laundering, drug trafficking, and terrorist financing. The CTA requires companies doing business in the United States to report the ownership and management information of individuals who directly or indirectly own or control the company to FinCEN’s centralized database.

Prior to the injunction, Companies registered to do business before January 1, 2024 had until January 1, 2025 to file initial BOI reports. Companies created on or after January 1, 2024 and before January 1, 2025, would to report ownership information within 90 days of notification that the company’s formation was effective. Companies registered after January 1, 2025 would be required to file within 30 days from notice of formation. FinCEN interprets the court’s injunction order to apply broadly and to effectively “…stay all [reporting companies’] deadlines to comply with the CTA’s reporting requirements…”

Recommendation

We recommend that reporting companies which have not yet filed BOI reports either file voluntarily or monitor the FinCEN website (https://fincen.gov/boi) for updates on the status of filing obligations. Due to uncertainty over efforts to overturn the injunction, companies should prepare to comply with the CTA because it is impossible to predict whether (or to what extent) the injunction will be lifted; and, if lifted, how long FinCEN will extend the BOI filing deadline.

If you have questions regarding the CTA’s BOI compliance and reporting obligations, please contact one of our attorneys.