UPDATE: Federal Court Issues Preliminary Injunction on Enforcement of Federal Corporate Transparency Act – BOI Mandatory Reporting Compliance Voluntary Until Further Notice

The Corporate Transparency Act (CTA) requires that “Reporting Companies” report identifying information about the individuals who directly or indirectly own or control those companies. These beneficial ownership information (BOI) reports are electronically filed with the Treasury Department’s Financial Crimes Enforcement Network (FinCEN). The CTA requires any entity formed or registered to do business in the United States prior to January 1, 2024 to file its BOI with FinCEN on or before January 1, 2025, and any entity filed after January 1, 2024 to file its BOI with FinCEN within 90 days of formation.

On December 3, 2024, the U.S. District Court for the Eastern District of Texas granted a nationwide preliminary injunction that enjoins the federal government from enforcing the CTA.¹ This ruling halts the impending January 1, 2025 filing deadline under the CTA, although subsequent litigation may reverse this ruling and reinstate that filing deadline. The district court’s order is not a final decision on the constitutionality of the CTA. The district court only determined that the CTA was “likely” unconstitutional, and granted the preliminary injunction because a final determination as to the constitutionality of the CTA will not arrive until well past the January 1 deadline.

On December 5th, the U.S. Government appealed the district court’s ruling to the Fifth Circuit Court of Appeals, and may now attempt to obtain a stay of the district court’s preliminary injunction in order to allow the CTA to go into effect on January 1, 2025, as originally planned.

Additionally, FinCEN issued a statement that it will comply with the district court’s order “for as long as it remains in effect” and that the filing of BOIs is now solely voluntary and Reporting Companies “will not be subject to liability if they fail to [file] while the preliminary injunction remains in effect.” While it is possible that FinCEN may defer the CTA reporting deadline in light of the uncertainty generated by this litigation, there is no guarantee as to if, or when, Reporting Companies may be required to submit BOIs to FinCEN.

Given the continuing uncertainty of Reporting Companies’ obligations at this time, all entities subject to the CTA may wish to continue to prepare their FinCEN reporting materials as if the January 1 deadline is still in place, although these companies are not currently under any obligation to file with FinCEN. All Reporting Companies should follow this matter closely, as the future of the CTA remains uncertain, and should be on the lookout for updates from the Fifth Circuit, the Department of the Treasury, or subsequent reports from Wilk Auslander.

We here at Wilk Auslander continually stay abreast of new developments and their applications in corporate law. If you would like to further discuss the CTA, please reach out to Stephen Albert at (212) 981-2320, salbert@wilkauslander.com, Jonathan Bender at (212) 981-2322, jbender@wilkauslander.com, Mark Clyman at (212) 981-2318, mclyman@wilkauslander.com, Jack Wilk at (212) 981-2333, jwilk@wilkauslander.com or Caitlyn Ford at (212) 981-2307, cford@wilkauslander.com.

At Wilk Auslander we advise businesses and entrepreneurs across a diverse spectrum of corporate and commercial dealings. Our clients range from startups to seasoned investors and small business to large multinational enterprises. We recognize the unique needs of each client, and craft innovative and cost-efficient strategies tailored to address their specific challenges and help them achieve their business objectives and corporate compliance while mitigating both immediate and long-term risks.

¹ Texas Top Cop Shop, Inc., et al. v. Garland, et al. (Case No. 24-cv-00478, E.D. Tx.)