Legal Bulletins
Corporate Transparency Act Injunction: What You Need to Know
As we have previously alerted you, the Corporate Transparency Act (CTA) obligates certain companies to file Beneficial Ownership Information Reports (BOIR) regarding their beneficial owners. On December 3, 2024, the CTA was declared “likely unconstitutional” by a United States District Court in Texas, and it issued a preliminary injunction against enforcement of the Act (Texas Top Cop Shop, Inc., et al. v. Garland, et al., No. 4:24-cv-00478 (E.D. Tex.)). As a result, reporting companies that would otherwise be required to comply with the CTA’s reporting requirements may refrain from submitting information about their beneficial owners while the injunction remains in effect. (Notably, earlier this year, the federal government appealed an Alabama United States District Court ruling that the CTA is unconstitutional, and that appeal is pending in the United States Eleventh Circuit Court of Appeals.)
Prior to the issuance of the injunction, the CTA required reporting companies that were in existence prior to January 1, 2024, to file their beneficial ownership reports by January 1, 2025, and any reporting companies formed during 2024 to file within 90 days of formation.
Following up on the federal court’s injunction, on December 6, 2024, the Financial Crimes Enforcement Network (FinCEN), the government division charged with enforcing the CTA, acknowledged the injunction and issued the following statement on its BOI website (https://fincen.gov/boi):
“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.”
Additionally, FinCEN’s added the following on its BOI E-Filing System webpage (https://boiefiling.fincen.gov/):
“BOI e-Filing Alert: Please note that beneficial ownership information reporting requirements have been affected by a recent federal court order. The Department of the Treasury is appealing that order. In the meantime, reporting companies are not currently required to file a BOIR and are not subject to liability if they fail to do so while the applicable order remains in force.
“However, reporting companies may still opt to file a BOIR.”
If the government is successful in its appeal and the injunction against the CTA is lifted, reporting companies will again become subject to the reporting requirements within the periods to be prescribed by FinCEN. Therefore, we recommend that reporting companies that have not yet filed a BOIR with FinCEN nevertheless continue to collect the necessary information from their beneficial owners so that, in the event the injunction is lifted, a BOIR can be filed quickly.
We will continue to monitor this closely and provide updates as they become available.
For more information concerning the CTA, the reporting requirements, or the injunction, please contact James McKittrick or Michele Walsh.
James J. McKittrick, Jr.
410-576-4134 • jmckittrick@gfrlaw.com
Michele Bresnick Walsh
410-576-4216 • mwalsh@gfrlaw.com