Beneficial Ownership Reporting Requirement Suspended Following Court Order

December 2024 Update

In a significant development, the Financial Crimes Enforcement Network (FinCEN) has announced the suspension of the Beneficial Ownership Information (BOI) reporting requirements mandated under the Corporate Transparency Act (CTA). This change follows a recent court order that has temporarily suspended enforcement of these requirements. Here's what you need to know about the situation and its implications.

Background on the Corporate Transparency Act (CTA)

The CTA was enacted to enhance transparency in corporate ownership, aiming to combat illicit financial activities such as money laundering, terrorist financing, and drug trafficking. By requiring most U.S. companies to disclose their beneficial ownership information, the CTA sought to close loopholes exploited by bad actors and level the playing field for law-abiding businesses.

FinCEN’s BOI reporting requirements were set to take effect in 2024, requiring reporting companies to submit ownership details. These reports were intended to provide law enforcement with valuable tools to address financial crimes while safeguarding small businesses from unfair competition.

The Legal Challenge: Texas Top Cop Shop, Inc. v. Garland, et al.

On December 3, 2024, the U.S. District Court for the Eastern District of Texas issued a preliminary injunction in the case of Texas Top Cop Shop, Inc., et al. v. Garland, et al., halting enforcement of the CTA nationwide. The court’s order:

1. Prohibits FinCEN from enforcing the CTA and its BOI reporting requirements.

2. Stays all deadlines for compliance with the CTA.

The Department of Justice has filed an appeal against this ruling, asserting the constitutionality of the CTA. This case is one of several ongoing legal challenges, with courts in other jurisdictions previously upholding the CTA’s provisions.

What This Means for Businesses

For the time being, reporting companies are:

• Not required to file BOI reports with FinCEN.

• Not subject to liability for failing to submit reports while the preliminary injunction is in effect.

However, FinCEN is still accepting voluntary BOI reports from companies that wish to submit them.

Looking Ahead

As litigation over the CTA continues, the situation remains fluid. Businesses should stay informed about developments and be prepared to comply with BOI reporting requirements should the injunction be lifted. FinCEN has committed to complying with the court order for as long as it remains in effect but will provide updates as the legal process unfolds.

If you have questions about how this suspension affects your business or need guidance on voluntary reporting, feel free to reach out to our office. We’re here to help you navigate this evolving landscape and ensure compliance with federal regulations.

Stay Informed

This is a rapidly changing issue. For the latest updates, check FinCEN’s website or consult with a trusted professional advisor.