Another Corporate Transparency Act Compliance Update
December 30, 2024
Another Corporate Transparency Act Compliance Update
Nationwide Injunction in Place Again
The US Fifth Circuit Court of Appeals vacated the stay and reinstated the nationwide preliminary injunction enjoining the enforcement of the Corporate Transparency Act (CTA) and its reporting rule, as well as impending reporting deadlines. The Treasury Department’s Financial Crimes Enforcement Network (FinCEN) subsequently issued a release stating that reporting companies are not currently required to file Beneficial Ownership Information Reports (BOIR) 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 file BOIRs.
Accordingly, no filings under the CTA are currently required. A timeline of events is stated below:
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On January 1, 2024, the Corporate Transparency Act (CTA) went into effect requiring “reporting companies” in the United States to disclose information about their beneficial owners — the individuals who ultimately own or control a company — to the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) by filing a Beneficial Ownership Information Report (BOIR).
On December 3, 2024, the U.S. District Court for the Eastern District of Texas granted a nationwide preliminary injunction that enjoins the federal government from enforcing the CTA. This court ordered that neither the CTA nor the implementing rules adopted by FinCEN may be enforced and that reporting companies need not comply with the CTA’s January 1, 2025 deadline for filing BOIRs.
On December 23, 2024, a panel of the Fifth Circuit Court of Appeals stayed the preliminary injunction previously issued by the Texas federal court. This means that reporting companies are once again required to file BOIRs with FinCEN. FinCEN has since issued an alert notifying reporting companies that the BOIR reporting requirement has been reinstated and extended the deadline to file a BOIR until January 13, 2025.
On December 26, 2024, the full 5th Circuit Court of Appeals lifted the stay and reinstated the injunction as noted above. The 5th Circuit also set March 25, 2025 as the date for oral arguments on the merits of the underlying case.
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Despite all the back and forth, the Fifth Circuit has yet to rule on the underlying issue of the CTA’s constitutionality. That said, regardless of whether the CTA is ultimately held to be unconstitutional, by lifting the stay and reinstating the injunction reporting companies right now are no longer required to file BOIRs.
The future remains uncertain as to CTA compliance because of the pending Texas case, the pending change in administrations in Washington DC., as well as other pending cases. Please contact your Riezman Berger attorney with any questions or if you wish to engage Riezman Berger to file a BOIR.
If CTA compliance is ultimately held to be enforceable, please be advised that under the CTA, failure to timely file a BOIR can result in significant penalties (including civil and criminal penalties).
Please note that Riezman Berger does not provide advice as to the application of these laws to an entity unless we have been expressly engaged to provide such advice.
We will continue to monitor developments in the Texas case. If you have any questions, please contact your Riezman Berger attorney or Riezman Berger generally at 314-727-0101.