Corporate Transparency Act Archives

FinCEN Beneficial Owner Information Report Filings Stayed

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.

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.), the U.S. District Court for the Eastern District of Texas, Sherman Division, issued an order granting a nationwide preliminary injunction. Texas Top Cop Shop is only one of several cases that have challenged the Corporate Transparency Act (CTA) 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. For that reason, the Department of Justice, on behalf of the Department of the Treasury, filed a Notice of Appeal on December 5, 2024 and separately sought of stay of the injunction pending that appeal.

On December 23, 2024, a panel of the U.S. Court of Appeals for the Fifth Circuit granted a stay of the district court’s preliminary injunction entered in the case of Texas Top Cop Shop, Inc. v. Garland, pending the outcome of the Department of the Treasury’s ongoing appeal of the district court’s order. FinCEN immediately issued an alert notifying the public of this ruling, and recognizing that reporting companies may have needed additional time to comply with beneficial ownership reporting requirements, FinCEN extended reporting deadlines.

On December 27, 2024, however, a different panel of the U.S. Court of Appeals for the Fifth Circuit issued an order vacating the Court’s December 23, 2024 order granting a stay of the preliminary injunction. Accordingly, as of December 26, 2024, the injunction issued by the district court in Texas Top Cop Shop, Inc. v. Garland is in effect, and reporting companies are not currently required to file beneficial ownership information with FinCEN.

Federal District Court Rules Corporate Transparency Act Unconstitutional

The following is a March 4, 2024, news item on FinCEN’s website:

On March 1, 2024, in the case of National Small Business United v. Yellen, No. 5:22-cv-01448 (N.D. Ala.), a federal district court in the Northern District of Alabama, Northeastern Division, entered a final declaratory judgment, concluding that the Corporate Transparency Act exceeds the Constitution’s limits on Congress’s power and enjoining the Department of the Treasury and FinCEN from enforcing the Corporate Transparency Act against the plaintiffs. FinCEN will comply with the court’s order for as long as it remains in effect. As a result, the government is not currently enforcing the Corporate Transparency Act against the plaintiffs in that action: Isaac Winkles, reporting companies for which Isaac Winkles is the beneficial owner or applicant, the National Small Business Association, and members of the National Small Business Association (as of March 1, 2024). Those individuals and entities are not required to report beneficial ownership information to FinCEN at this time.

Wolters Kluwer’s March 5, 2024, article states:

“the court’s ruling prohibits CTA enforcement only against the NSBA itself and all of its members. . . . Many believe that all reporting companies facing CTA deadlines should seriously consider filing , , . Businesses that fail to file in time to meet their CTA deadlines are betting on the NSBA prevailing in the courts. Meanwhile, if the UST prevails, these businesses will potentially face significant civil fines, interest, and penalties, as well as possible criminal penalties, including jail time.

The law firm of Akin Gump wrote an article on the case and said:

“The court’s injunction is limited to the plaintiffs in the case (i.e., the individual plaintiff and the NSBA). It is unclear at this point if the injunction will be understood to apply to all of the approximately 65,000 individual members of the NSBA or only to the association.”

The Katten law firm’s article states:

“Note that the case was decided on summary judgment at the federal district court level and that the language from the final judgment specifically relates solely to the plaintiffs in this case (i.e., the National Small Business Association (NSBA) and a specific business owner who is a member of the NSBA). . . . At this time, we believe it remains prudent practice for clients to continue to abide by the reporting requirements set forth under the CTA until additional guidance becomes available.

Baker Hostetler law firm’s March 5, 2024, article says:

“The relief from this ruling currently applies only to the named plaintiffs, which include the members of the National Small Business Association (NSBA). The immediate impact of this ruling on all other companies is unclear. However, companies that were not party to the suit may not rely on this decision to avoid complying with the CTA, absent new guidance from the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) permitting them to do so. . . . As of now, this ruling technically applies only to the 65,000 members of the NSBA. In other words, no other company may rely on this decision to avoid complying with the CTA, absent new guidance from FinCEN permitting them to do so.”

FinCEN Filer, LLC’s advice as a result of this case is:

Companies formed before 2024: Hold off until November or December of 2024 to see what happens. If the courts find reporting companies do not have to file a FinCEN BOI report then none of the pre-2024 companies needs to file. If the courts find that the CTA is constitutional and the law applies to all reporting companies then file the FinCEN BOI report before December 31, 2024. If there is no resolution of this issue before December 31, 2024, then file the FinCEN BOI report on or before December 31, 2024, so you eliminate the possibility of a $500 a day late filing fine.

Companies formed in 2024: File the FinCEN BOI report within 90 days of formation unless there is a final ruling that the CTA is unconstitutional and companies do not have to file a FinCEN BOI report before the expiration of the 90 period.