Court Blocks Corporate Transparency Act “BOI” Reporting Rule: What YOU Need to Know

Court Blocks Corporate Transparency Act "BOI" Reporting Rule

On December 3, 2024, the U.S. District Court for the Eastern District of Texas issued a nationwide preliminary injunction temporarily halting enforcement of the Corporate Transparency Act (CTA) and its Reporting Rule. This decision suspends the requirement for reporting companies to disclose beneficial ownership information (BOI) to the Financial Crimes Enforcement Network (FinCEN), just weeks before the January 1, 2025 compliance deadline for companies formed prior to 2024.

The Court’s Decision

The court determined that the CTA and its Reporting Rule likely exceed Congress’s authority and infringe upon constitutional protections. Although the ruling is not a final determination of the CTA’s legality, it prevents enforcement while legal challenges proceed.

In its order, the court stated:

“Enforcement of the Reporting Rule, 31 C.F.R. § 1010.380 is also hereby enjoined, and the compliance deadline is stayed under § 705 of the APA. Neither may be enforced, and reporting companies need not comply with the CTA’s January 1, 2025, BOI reporting deadline pending further order of the Court.”

This injunction applies nationwide, providing temporary relief for all reporting companies that would have been subject to the January 1 deadline.

What This Means for Businesses

The CTA, enacted in 2021, aimed to strengthen efforts against money laundering and illicit financing by requiring most U.S. companies to report detailed ownership information. The court’s decision offers businesses a temporary reprieve, but the situation remains fluid.

Key Implications:

  1. Temporary Suspension of Reporting Obligations: Companies are not required to submit BOI reports to FinCEN as of now.
  2. Potential for Reinstatement: The injunction could be overturned or modified by higher courts, which may reinstate the reporting obligations at any time.
  3. Uncertain Legal Landscape: Businesses must be prepared for rapid changes in compliance requirements depending on the outcome of appeals or legislative actions.

What’s Next?

The federal government is likely to appeal the ruling to the Fifth Circuit Court of Appeals, and the case may ultimately reach the U.S. Supreme Court. Congress and FinCEN may also take steps to address the court’s concerns or modify the CTA.

Stay tuned to our newsletters, as compliance requirements could resurface quickly if the injunction is lifted.

Recommendations for YOU

  • Stay Prepared: Despite the pause, businesses should be ready to comply with the Reporting Rule if the legal injunction is overturned.
  • We are here for you: Keep us saved in your contacts to keep up to date with these rules which could change quickly. Compliance readiness, even during this period of uncertainty, is the best strategy for navigating the evolving legal landscape surrounding the CTA.