On December 3, 2024, a Federal District Court in Texas issued a nationwide preliminary injunction against FinCEN enforcing the Beneficial Ownership Information (“BOI”) reporting as mandated by the Corporate Transparency Act (“CTA”) stating that the regulation is likely unconstitutional and outside of Congress’s power. Under the injunction, the CTA and the BOI reporting rules are temporarily halted.

The District Court’s decision is not a final determination that the CTA is unconstitutional; rather, it represents the court’s finding that the law is likely unconstitutional. FinCEN has subsequently confirmed that reporting companies are not required to file the BOI report and will not be subject to liability if they fail to do so but may continue to voluntarily submit BOI reports while the injunction remains in effect.

As a response to the injunction, on December 5, 2024, the U.S. Department of Justice filed an appeal and on December 11, 2024, filed a motion to stay the preliminary injunction pending its appeal. The government’s most recent actions appear to demonstrate the government’s resolve to preserve the original January 1, 2025, reporting deadline.

Given the uncertainty, we recommend that you should continue to gather the necessary information and be prepared to file the BOI report by the stated deadline in the eventuality the injunction is lifted.

As a reminder, the CTA initially went into effect as of January 1, 2024, requiring timely submission of specified information on a new form known as the Beneficial Ownership Information Report for newly formed entities. Effective January 1, 2025, all entities existing prior to January 1, 2024, would be required to file an initial BOI report. You can find more information in our most recent memo here.

We will continue to monitor events as they unfold and provide updates. If you have any questions on this injunction, please do not hesitate to reach out to us.