CHRISTMAS COMES EARLY FOR BUSINESSES: ENFORCEMENT OF THE BENEFICIAL OWNERSHIP INFORMATION REPORTING REQUIREMENTS SUSPENDED

The Corporate Transparency Act (“CTA”) was enacted to combat criminal activities, specifically terrorist financing, tax evasion, and money laundering. by requiring certain entities to disclose information about their beneficial owners. The United States Department of the Treasury’s Financial Crimes Enforcement Network (“FinCEN”) oversees the implementation of the CTA, under which reporting companies were required to submit Beneficial Ownership Information (“BOI”) reports to FinCEN on or before the January 1, 2025 deadline.

However, on December 3, 2024, the U.S. District Court for the Eastern District of Texas issued a preliminary injunction prohibiting the federal government from enforcing the CTA on a national basis. Texas Top Cop Shop, Inc., et al. v. Garland, et al., Case No. 4:24-cv-478 (E.D. Tex.). The Court’s preliminary injunction has effectively suspended enforcement of the BOI reporting requirements for the time being. 

The Texas Top Cop Shop Court held that the CTA’s BOI reporting requirements to FinCEN were likely unconstitutional on the basis that Congress overstepped its Commerce Clause authority. The consequences of the decision are that FinCEN is currently prohibited from enforcing any of the CTA’s penalties for noncompliance. Reporting companies need not comply with the upcoming January 1, 2025, BOI reporting deadline, pending further order of the Court or a higher court.

That said, BOI reporting companies may continue to file such reports on a voluntary basis while the litigation over the requirements is on hold.

For more information regarding BOI filing requirements or any other business-related legal issues, please contact Shawn P. Dontigney at sdontigney@spdlawllc.com or 860.338.4997.