Beneficial Ownership Interest Reporting Requirements Temporarily on Hold

As a business owner, you may or may not have been aware of the Corporate Transparency Act’s
(CTA) requirement that many businesses report entity and ownership information in something
called a Beneficial Ownership Information Report.

These requirements took effect on January 1, 2024, and imposed deadlines for reporting. Reporting companies created or registered before January 1, 2024, had until January 1, 2025, to file their initial reports. Companies formed or registered between January 1, 2024, and January 1, 2025, had 90 days from receiving notice of their effective registration to file. For entities created or registered on or after January 1, 2025, the filing deadline was 30 days after formation or registration.

Preliminary Injunction

The reporting requirements mentioned above are now on hold. On December 3, 2024, the U.S. District Court for the Eastern District of Texas entered a nationwide preliminary injunction preventing enforcement of the Corporate Transparency Act (CTA) and the required reporting. This ruling came in Texas Top Cop Shop, Inc. v. Garland, No. 4:24-CV-478, ___ F. Supp. 3d ___ (ED Tex Dec 3, 2024).

Significance

For business owners, this means that, for now, you do not have to file reports. The Financial Crimes Enforcement Network (FinCEN), in charge of implementing the CTA, stated, “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.”

It is important to note, though, that a preliminary injunction is not a final ruling. Rather, the injunction prevents enforcement of the CTA until a final judgment can be made on the merits of the case. And while the Texas District Court found that the CTA is likely unconstitutional, the case must be fully decided.

Furthermore, the Department of Justice filed notice of appeal on December 5, 2024. The DOJ seeks to stay the injunction. Thus, the preliminary injunction is almost certainly not the last ruling we will receive before the end of the year. The Fifth Circuit Court of Appeals could stay the injunction or adjust its scope, rendering the CTA enforceable again in whole or in part.

In sum, there is no guarantee that the CTA will remain unenforceable. While the nationwide preliminary injunction provides temporary relief from CTA reporting requirements, it is crucial to remain cautious and prepared. Companies should continue gathering the necessary information for potential future compliance. Finally, given this uncertainty, businesses would be wise to stay informed about any developments and maintain readiness to comply with the CTA should the injunction be lifted or modified.

Disclaimer

This publication is for general information only. The information contained is not intended as formal legal advice. If you have any questions or need assistance, please contact your attorney at Curtis, Curtis & Brelinski, P.C.

Article by: Ethan J. Loch