Court Blocks Corporate Transparency Act

Through out the year, we have been informing our clients about the requirements of Beneficial Ownership Interest (BOI) reporting under the Corporate Transparency Act (CTA). On December 3, 2024, the U.S. District Court for the Eastern District of Texas issued a nationwide preliminary injunction concluding that the CTA exceeds the U.S. Constitution limits on Congress’ power. In doing so, it blocked the U.S. Department of Treasury and FinCEN from enforcing the CTA and its BOI reporting requirements.

As of today, reporting companies are not required to comply with the BOI requirements regardless of which state they are registered in, including filing by the January 1, 2025, deadline, until further court order.

Looking forward, here is our advice for you.

1. Stay Informed: This is a preliminary injunction, and subsequent rulings in this case or others could modify or overturn this order. Businesses should monitor developments. Similar to the decision in National Small Business United v. Yellen, in the U.S. Northern District of Alabama, the Justice Department may appeal the court’s order, but the outcome of that appeal, and whether that outcome will be the final word, remains to be seen. It is also possible the new administration will choose not to pursue an appeal.
   

2. Evaluate Compliance Plans: While the nationwide preliminary injunction temporarily halts enforcement of the CTA, the uncertainty surrounding its ultimate fate means companies should be prepared to resume compliance efforts if the injunction is lifted. Some reporting companies may choose to proceed with compliance efforts despite the preliminary injunction, on the assumption that it could be modified or overturned any time. If the injunction is lifted, it is unclear how long reporting companies would have to then comply with the BOI reporting requirements and other obligations under the CTA.
   

3. Consider Voluntary Filing the BOI by Year's End: Although not legally required while the preliminary injunction is in effect, some business owners may conclude that it is simply easier to just ignore the injunction and file their BOI information now while the FinCEN website is still accepting the information. Adopting this approach relieves the business of having to worry about the above steps. If the injunction stands for any reason, FinCEN will have your BOI information (and presumably will ultimately destroy it as improvidently collected), but many businesses are not bothered by that.

NMS is unable to provide advice on whether you should file at this time or not, but can only provide the facts surrounding the injunction so that you may be able to make a decision. Please let us know at your earliest convenience if you would like us to continue the filing, or to place it on hold until further information or decisions from the court have been provided, or if you have any other questions, please let us know. NMS will not file until we hear from you.

Thank you,

NMS Certified Public Accountants