HSAG Client Alert December 10, 2024
Federal Court Enjoins Federal Beneficial Owner Reporting Nationwide
On Tuesday, December 3, 2024, in the case of Texas Top Cop Shop, Inc., et al. v. Garland, et al., No. 4:24-cv-00478 (E.D. Tex.), a federal district court issued an order granting a nationwide preliminary injunction that:
(1) enjoins the Corporate Transparency Act (CTA), including enforcement of that statute and regulations implementing its beneficial ownership information (BOI) reporting requirements, and
(2) stays all deadlines to comply with the CTA’s reporting requirements.
On December 5, 2024, the Department of Justice appealed this recent court ruling in the Eastern District of Texas. The U.S. Financial Crimes Enforcement Network (FinCEN) has posted a statement to its website providing additional information about the court’s ruling and the appeal.
FinCEN’s statement confirms that FinCEN will comply with the court’s ruling for so long as it remains in effect. Therefore, companies are not subject to fines and penalties for failing to file BOI reports while the current nationwide injunction ruling is in effect. FinCEN’s website states that companies can continue to comply with the CTA and file BOI reports voluntarily.
Based on the ruling and FinCEN’s statement, CTA reporting companies are not currently required to file beneficial ownership information with FinCEN and will not be subject to liability if they fail to do so. Nevertheless, reporting companies may continue to voluntarily submit new beneficial ownership information reports and update information previously filed in BOI reports previously filed with FinCEN.
Depending on the fluid status of new and existing legal challenges and appeals regarding the legality of the CTA, reporting companies’ legal obligations under the CTA could be subject to change on short notice. If the CTA’s beneficial ownership reporting requirements become enforceable again, companies will need to be prepared to meet their reporting obligations within applicable BOI report filing deadlines.
Organizations that believe they may be subject to CTA’s beneficial ownership reporting requirements should closely monitor these developments to understand when, if at all, they need to comply with the federal requirements and should be prepared with accurate beneficial ownership information in advance of any CTA filing deadlines that may be re-established in the future.
Please contact your legal advisor at Hackstaff Snow Atkinson & Griess, LLC should you have any further questions or concerns about these recent developments.