Federal Court Halts Corporate Transparency Act Implementation

On Dec. 3, 2024, a federal court in Texas blocked enforcement of the beneficial ownership (BOI) reporting requirements under the Corporate Transparency Act (CTA).

The ruling, which covers the entire United States, means companies do not have to submit this information. It is a win for the Metals Service Center Institute, which, with partners at the U.S. Chamber of Commerce, the National Association of Manufacturers, and the S-Corp Association had advocated for doing away with these requirements, or at least delaying implementation of them.

As Connecting the Dots  has explained in the past, the CTA, approved by Congress in 2020, requires companies with $5 million or less in revenue and 20 or fewer employees to file the reports with the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN). Under the CTA the deadline to file these BOI reports for most entities is January 1, 2025.

The judge in the case found this requirement is most likely to be found unconstitutional and that its implementation would irreparably harm reporting companies if they were forced to comply. The preliminary relief will remain in effect until the conclusion of legal proceedings, at which point the court may enter a permanent injunction.

The U.S. Department of Justice quickly filed an appeal to get the injunction lifted, but it is unclear when the U.S. Fifth Circuit Court of Appeals might rule on that request. In the meantime, FinCEN posted a notice stating that it would comply with the court order and that covered entities are, indeed, under no obligation to complete their CTA filings. (FinCEN noted companies may still file voluntarily if they would like, however.)

The bottom line: unless and until an appellate court overrules or narrows the injunction, no businesses are obligated to comply with the reporting requirements.

Learn more about the Corporate Transparency Act at this link and learn more about what could happen next at this link.