Are you following the bouncing ball here? Let’s revisit:
On Tuesday, December 3, 2024, in the case of Texas Top Cop Shop, Inc., et al. v. Garland, et al., No. 4:24-cv-00478 (E.D. Tex.), the U.S. District Court for the Eastern District of Texas, Sherman Division, issued an order granting a nationwide preliminary injunction. This ruling stems from a case brought by several plaintiffs, including the National Federation of Independent Business (NFIB), who argued the legislation intrudes on states’ rights to regulate businesses. While the court agreed, it did not address additional constitutional challenges under the First and Fourth amendments.
On December 23, 2024, a Federal Court of Appeals decision lifted the injunction put in place earlier this month which means reporting companies are once again required to file Beneficial Ownership Information with FinCEN. While the court ruling put the original January 1, 2025, deadline back in place, the Department of the Treasury announced it will extend the deadline.
But in a quick turn of events, on December 26, 2024, a different panel of the U.S. Court of Appeals for the Fifth Circuit issued an order vacating the Court’s December 23, 2024, order granting a stay of the preliminary injunction.
So, where are we now? FinCEN issued an update on December 27, 2024, stating “reporting companies are not currently required to file beneficial ownership information with FinCEN.” So, for now, the reporting requirement is back on hold.
What happened on December 23, 2024?
On December 23, 2024, the U.S. Court of Appeals for the Fifth Circuit granted a stay of the district court’s preliminary injunction enjoining the Corporate Transparency Act (CTA) entered in the case of Texas Top Cop Shop, Inc. v. Garland, pending the outcome of the Department of the Treasury’s ongoing appeal of the district court’s order. Texas Top Cop Shop is only one of several cases that have challenged the CTA pending before courts around the country. Several district courts have denied requests to enjoin the CTA, ruling in favor of the Department of the Treasury. After the injunction was listed, the Department of Treasury granted extensions in the BOI filing deadlines, stating:
- Reporting companies that were created or registered prior to January 1, 2024, have until January 13, 2025, to file their initial beneficial ownership information reports with FinCEN.
- Reporting companies created or registered in the United States on or after September 4, 2024, that had a filing deadline between December 3, 2024, and December 23, 2024, have until January 13, 2025 to file their initial beneficial ownership information reports with FinCEN.
- Reporting companies created or registered in the United States on or after December 3, 2024, and on or before December 23, 2024, have an additional 21 days from their original filing deadline to file their initial beneficial ownership information reports with FinCEN.
- Reporting companies that qualify for disaster relief may have extended deadlines that fall beyond January 13, 2025. These companies should abide by whichever deadline falls later.
- Reporting companies that are created or registered in the United States on or after January 1, 2025, have 30 days to file their initial beneficial ownership information reports with FinCEN after receiving actual or public notice that their creation or registration is effective.
There was one exception to this requirement: The Plaintiffs in National Small Business United v. Yellen, No. 5:22-cv-01448 (N.D. Ala.)—namely, Isaac Winkles, reporting companies for which Isaac Winkles is the beneficial owner or applicant, the National Small Business Association, and members of the National Small Business Association (as of March 1, 2024)—are not currently required to report their beneficial ownership information to FinCEN at this time.
Legal Challenges to Beneficial Ownership Information Filings.
According to the American Bar Association, several other federal district courts around the country have also ruled on the constitutionality of the CTA in recent months, with mixed results. In National Small Business United v. Yellen, No. 5:22-cv-01448 (N.D. Ala. Mar. 1, 2024), an Alabama district court ruled that the CTA is unconstitutional and enjoined FinCEN from enforcing the Act against the plaintiffs. By contrast, federal district courts in Oregon (Firestone v. Yellen, No. 3:24-cv-1034 (D. Or. Sept. 20, 2024)) and Virgina (Community Associations Institute v. Yellen, No. 24-cv-01597 (E.D. Va. Oct. 24, 2024)) denied the plaintiffs’ requests for preliminary injunctions after concluding that Congress likely did not exceed its powers in enacting the CTA.
On November 5, 2024, 40 members of Congress sent a letter to FinCEN, requesting a one-year delay of the CTA’s implementation. The American Bar Association supported legislation that would have extended the filing deadline, but the legislation failed to pass.
Many Businesses Have Not Yet Completed Beneficial Ownership Information (BOI) Reporting
According to the ABA Banking Journal, by mid-November, as the initial January 1 reporting deadline approached, only about a quarter of the estimated 32.5 million covered businesses had registered. According to newly released poll data from Wolters Kluwer, 37% of firms were waiting until closer to the deadline and 12% said they had insufficient resources to do the filing. Meanwhile, 9% of businesses believed they were not covered by the rule, and 32% were unsure whether the rule applied to them.
More Legal Challenges to Come
This is not the only legal challenge to the Beneficial Ownership Information reporting obligation. Much can happen between now and January 13, 2025, however business should continue to assess their BOI reporting obligations and determine if they wish to file or wish to once again wait and see.
For more information on the Beneficial Ownership Information Requirements or the Corporate Transparency Act, see our blog here: The Corporate Transparency Act – Navigant Law Group, LLC
Should you have any questions about Beneficial Ownership Reporting (BOI) or other reporting obligations for your business or would like to schedule an initial consultation, please contact Navigant Law Group, LLC at (847) 253-8800 or email us at hello@navigantlaw.com.
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