As you may know, there was a new rule that went into effect this year: the Corporate Transparency Act. The act requires those who are considered a “beneficial owner” of a particular type of entity (like a limited liability company or corporation) to file a Beneficial Ownership Information (BOI) report. See our previous blog post on BOI reporting for more details.

The Corporate Transparency Act would have required an estimated 32.6 million companies to file BOI reports to the Financial Crimes Enforcement Network (FinCEN) by January 1, 2025. There has been a change: on December 3, 2024, the U.S. District Court for the Eastern District of Texas issued a nationwide order prohibiting the federal government from enforcing the act.

The Court ruled that “the CTA is likely unconstitutional as outside of Congress’s power” and that “plaintiffs have met their burden to show a substantial likelihood of success on the merits of their Tenth Amendment Challenge.” (Citation: Top Cop Shop, Inc. et al. v. Garland, et al., at 79, Case No. 4:24-cv-478 (E.D. Tex)).

Therefore, as long as the injunction order remains in force, companies are not required to report beneficial ownership information with FinCEN.

The U.S. Department of Justice has appealed the injunction order to the Fifth Circuit Court of Appeals. A further appeal could be taken to the U.S. Supreme Court. If DOJ were to win on appeal, the injunction would be lifted and the BOI reporting requirement could resume.

DISCLAIMER: We do not assume responsibility for your company’s ongoing compliance obligations under the Corporate Transparency Act. We recommend that you remain compliant with any reporting requirements until a final ruling has been made and we are certain that the injunction will remain in force. If you have questions regarding your obligation to report beneficial ownership information with FinCEN, please contact your CPA or business attorney.

This post was created by Michael Dietz, estate planning associate at JM LAW, PLLC.