Updated: Texas Court Issues Nationwide Injunction on Corporate Transparency Act

December 23, 2024 Update: After the Fifth Circuit Court of Appeals granted the government’s motion to stay the injunction pending its appeal, FinCEN issued the following revised deadlines for submitting BOI reports:

• Reporting companies that were created or registered prior to January 1, 2024 have until January 13, 2025 to file their initial beneficial ownership information reports with FinCEN. (These companies would otherwise have been required to report by January 1, 2025.)
• Reporting companies created or registered in the United States on or after September 4, 2024 that had a filing deadline between December 3, 2024 and December 23, 2024 have until January 13, 2025 to file their initial beneficial ownership information reports with FinCEN.
• Reporting companies created or registered in the United States on or after December 3, 2024 and on or before December 23, 2024 have an additional 21 days from their original filing deadline to file their initial beneficial ownership information reports with FinCEN.
• Reporting companies that qualify for disaster relief may have extended deadlines that fall beyond January 13, 2025. These companies should abide by whichever deadline falls later.
• Reporting companies that are created or registered in the United States on or after January 1, 2025 have 30 days to file their initial beneficial ownership information reports with FinCEN after receiving actual or public notice that their creation or registration is effective.

December 23, 2024, Update: Today, the Fifth Circuit Court of Appeals granted the Government’s motion to stay the injunction pending its appeal. This means that the district court’s injunction is no longer in effect, and the BOI reporting deadline of January 1, 2025, is back in place.

December 12, 2024, Update: Last week, the government filed an appeal from the entry of the injunction. On December 11, the government filed a motion to stay the injunction pending its appeal. In the meantime, FinCEN has issued a public alert on its website, stating: “[R]eporting companies are not currently required to file their beneficial ownership information with FinCEN and will not be subject to liability if they fail to do so while the preliminary injunction remains in effect. Nevertheless, reporting companies may continue to voluntarily submit beneficial ownership information reports.” Beneficial Ownership Information Reporting | FinCEN.gov

On December 3, 2024, the U.S. District Court for the Eastern District of Texas issued a preliminary injunction blocking the U.S. Department of Treasury from enforcing the Corporate Transparency Act’s (CTA) beneficial ownership information (BOI) reporting requirements (see the full explanation of these requirements here).

The court’s decision in Texas Top Cop Shop, Inc., et al. v. Garland, et al. – a lawsuit filed by the National Federation of Independent Business (NFIB) – concluded that the CTA is likely unconstitutional in that it exceeds Congress’s constitutional authority. The Court held that the CTA likely does not regulate interstate commerce and is not justified under Congress’s power to enact laws “Necessary and Proper” to lay and collect taxes.

The nationwide injunction issued by the court effectively halts the enforcement of the CTA and its implementing regulations around the country. This decision purports to remove the obligation for business owners to comply with the CTA’s reporting requirements – such as providing detailed beneficial information to FinCEN by January 1, 2025 – while the injunction is in place. The practical effect of this injunction is that the federal government must refrain from imposing penalties and requiring compliance with the CTA until further legal determinations are made regarding the constitutionality and implementation of this injunction.

Although no public announcement has yet been made, the federal government is expected to appeal the court’s decision. Note that the court’s order is a preliminary injunction only. While it temporarily pauses enforcement of the CTA on a nationwide basis, enforcement could resume if the injunction is later reversed. Stay tuned for further updates from Fredrikson. If you have any questions, please contact Jessica Manivasager (jmanivasager@fredlaw.com).