In Texas Top Cop Shop, Inc., et al. v. Garland, et al., a federal district court judge issued a nationwide preliminary injunction barring enforcement of the Corporate Transparency Act (“CTA”), finding that the CTA likely exceeds Congress’s powers. Therefore, at present, a reporting company is not obligated to comply with the CTA and the government is enjoined from enforcing the CTA’s reporting requirements. As expected, on December 5, 2024, the government entered a notice of appeal of the preliminary injunction and may still seek a stay of the preliminary injunction pending the appeal. If a stay is granted by the Court of Appeals, the reporting obligations would once again be in effect. The Court of Appeals could also decide to keep the preliminary injunction in place while an appeal is pending.
At this time, companies are not required to file Beneficial Ownership Information (“BOI”) reports, although they are free to do so should they choose. Indeed, the Financial Crimes Enforcement Network (“FinCEN”) issued guidance after the entry of the notice of appeal, stating as much: “In light of a recent federal court order, reporting companies are not currently required to file beneficial ownership information with FinCEN and are not subject to liability if they fail to do so while the order remains in force. However, reporting companies may continue to voluntarily submit beneficial ownership information reports.” (available at https://www.fincen.gov/boi.)
At present, it is unknown how long companies would be given to file if the preliminary injunction is stayed, modified or the law is ultimately upheld. However, FinCEN’s statement suggests that a reasonable extension of time for filing can be expected, though that is not a certainty. Of course, if the CTA is ultimately struck down, no filing would be required.
For more information or assistance, contact Jeffrey M. Rosenfeld, Jacob M. Brownstein, or a member of Blank Rome’s Corporate group.
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