corporate transparency act and the recent injunction
Update as of December 9, 2024: FinCEN has now confirmed that reporting companies are not currently required to file BOI Reports due to the injunction. Additionally, reporting companies are not subject to liability while the injunction remains in effect. Should you choose to do so, you may voluntarily file a BOI Report, but doing so is not necessary at this time. Reporting companies may want to proceed with gathering the information needed for BOI Reports, so as to be prepared for the potential dissolution of the injunction. We will continue to monitor the situation and provide updates as they become available.
On December 3, 2024, the United States District Court for the Eastern District of Texas issued a nationwide preliminary injunction staying (stopping) enforcement of the Corporate Transparency Act (CTA) and its reporting requirements (see Texas Top Cop Shop, Inc. v. Garland). The CTA was enacted to make it harder for business owners to use companies to hide criminal activity by requiring them to provide certain information about the business, the company applicant, and the beneficial owners in a Beneficial Owner Information Report (BOI Report) and filing it with the Financial Crimes Enforcement Network (FinCEN). Judge Mazzant states in his opinion on the case that the CTA is not within Congress’s power to enact and is likely unconstitutional. While we believe it likely that this decision will be appealed to a higher court, it is impossible to know what the outcome might be.
It is important to note that the injunction is only a temporary measure put in place to stop enforcement of the CTA during the course of the litigation. Therefore, any business subject to the reporting requirements established by the CTA that fails to file a BOI Report by its specific reporting deadline risks noncompliance with the CTA. Reporting companies include but are not limited to non-exempt for-profit and nonprofit entities as well as homeowner and condominium associations. If the injunction is dissolved or if the CTA is found to be constitutional by a higher court, the consequences of non-compliance are fairly steep and include monetary penalties up to $500.00 per day the violation continues as well as criminal penalties of imprisonment for up to 2 years and a fine of up to $10,000.00.
Accordingly, given the temporary nature of the injunction, the uncertain outcome of the lawsuit, and the potential severity of the penalties if the BOI Report is not filed timely, in an abundance of caution we strongly advise that all non-exempt businesses file a BOI Report by its current filing deadline.
Reporting Deadlines*:
*Please note that FinCEN issued a 6-month extension for some businesses impacted by Hurricane Helene. You can find information on this here.
Please refer to our prior blog posts on the CTA or contact us if you need any additional information or require assistance meeting your filing deadline.
