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Beneficial Ownership Information

Beneficial Ownership Information (BOI) Reporting

Nationwide injunction halts BOI reporting for now; DOJ appeals

A federal district court, finding that the Corporate Transparency Act (CTA) is likely unconstitutional, issued an order on December 3 prohibiting the enforcement of the CTA and the beneficial ownership information (BOI) reporting rule in the CTA’s accompanying regulations. Under this injunction, FinCEN is barred from enforcing BOI filing requirements while the case is pending — technically the deadlines are still in effect.

On December 5, the Department of Justice (DOJ) filed a formal notice of appeal to the Fifth Circuit court, seeking a stay of the injunction and challenging the injunction that prevents FinCEN from enforcing the BOI reporting nationwide.

At this time, we do not know how the Fifth Circuit court will respond. The Fifth Circuit court could narrow the scope of the injunction to the named plaintiffs or stay the entire injunction, allowing FinCEN to enforce the BOI reporting. All this could happen prior to the Jan. 1, 2025, deadline.

As such, the AICPA continues to advise members that at a minimum those assisting clients with BOI report filings gather the required information from the clients and are prepared to file the BOI report if the injunction is lifted.

Alert: Impact of Ongoing Litigation – Deadline Stay – Voluntary Submission Only

In light of a recent federal court order, reporting companies are not currently required to file beneficial ownership information with FinCEN and are not subject to liability if they fail to do so while the order remains in force. However, reporting companies may continue to voluntarily submit beneficial ownership information reports.

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The Corporate Transparency Act (CTA) plays a vital role in protecting the U.S. and international financial systems, as well as people across the country, from illicit finance threats like terrorist financing, drug trafficking, and money laundering.Ã¢Â¯ The CTA levels the playing field for tens of millions of law-abiding small businesses across the United States and makes it harder for bad actors to exploit loopholes in order to gain an unfair advantage.

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.), a federal district court in the Eastern District of Texas, Sherman Division, issued an order granting a nationwide preliminary injunction that: (1)Ã¢Â¯enjoins the CTA, including enforcement of that statute and regulations implementing its beneficial ownership information reporting requirements, and, specifically, (2)Ã¢Â¯stays all deadlines to comply with the CTA’s reporting requirements. The Department of Justice, on behalf of the Department of the Treasury, filed a Notice of Appeal on December 5, 2024.

Texas Top Cop Shop is only one of several cases in which plaintiffs have challenged the CTA that are 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. The government continues to believe—consistent with the conclusions of the U.S. District Courts for the Eastern District of Virginia and the District of Oregon—that the CTA is constitutional.

While this litigation is ongoing, FinCEN will comply with the order issued by the U.S. District Court for the Eastern District of Texas for as long as it remains in effect. Therefore, reporting companies are not currently required to file their beneficial ownership information with FinCEN and will not be subject to liability if they fail to do so while the preliminary injunction remains in effect. Nevertheless, reporting companies may continue to voluntarily submit beneficial ownership information reports.