The enforcement of the Corporate Transparency Act (“CTA”), which requires most business entities to file electronic reports that identify their beneficial owners (“BOI reports”), has been temporarily paused due to ongoing federal litigation. Please read on to learn what it may mean for you.
On December 3, 2024, a federal district court in Texas issued a preliminary nationwide injunction that prevents any enforcement of the CTA and puts on hold any deadlines for filing of BOI reports. The United States government has already appealed the injunction to the Fifth Circuit Court of Appeals, and the matter is pending resolution. FinCEN, the federal agency tasked with enforcement of the CTA and where BOI reports are electronically filed, has acknowledged these developments. Specifically, FinCEN announced that it would continue to accept BOI reports on a voluntary basis only while the injunction remains in place (a link to FinCEN website update is here).
The preliminary nationwide injunction raises a host of questions for reporting companies, whether or not they have already filed their BOI reports.
Is the CTA dead? No. The CTA and its enforcement are on temporary hold.
What does the injunction actually mean for reporting companies? Reporting companies formed before 2024 would have been required to file their BOI reports by January 1, 2025. Reporting companies formed during 2024 would have been required to file their BOI reports within 90 days of formation. If a reporting company
- has already filed its BOI reports: No further action is needed. If any information in the previously filed BOI report has changed, the company can voluntarily file an updated BOI report or can “wait and see” if the injunction is lifted (see below).
- has gathered necessary information but has not filed its BOI reports: The company may file its BOI reports on a voluntary basis now and thus avoid the need to monitor further developments in the pending litigation. Alternatively, it can wait and see if the injunction is lifted.
- is still gathering necessary information: We recommend that reporting companies that still need to gather signification information continue the information gathering effort so that they are able to file – potentially on short notice – if the injunction is lifted.
- was formed in 2024 and should have already filed: The injunction applies to all enforcement action even if BOI reports should have already been filed. It is prudent to at least gather the information that is required for the BOI report. As noted, a reporting company may file voluntarily even though enforcement of CTA is currently paused.
Can a reporting company just “wait and see”? It is reasonable to hold off on filing BOI reports while the preliminary injunction is in effect and await further developments in the ongoing litigation. It is likely that if the injunction is lifted, some form of relief as to the timing of the reinstated filing obligations would be granted either by FinCEN or by the courts. Such relief might, at a minimum, extend filing deadlines to make up for time lost while the enforcement of CTA was on hold and may well extend filing deadlines further. However, reporting companies that are still gathering significant amounts of information could still find themselves under time pressure to file, and it is therefore advisable to gather the necessary information during this welcome break in the CTA’s enforcement.
This alert is for information purposes only and does not constitute legal advice. If you have questions about your particular situation, please reach out to your Tuthill & Hughes attorney to schedule a call.