Suspension of Required Beneficial Ownership Information Reporting

12/27/24 Update:

On December 26, 2024, a panel of the U.S. Court of Appeals for the Fifth Circuit issued an order vacating the Court’s December 23 order granting a stay of the preliminary injunction. Accordingly, as of December 26, 2024, the injunction issued by the district court in Texas Top Cop Shop, Inc. v. Garland is in effect and reporting companies are not currently required to file beneficial ownership information with FinCEN. Therefore, much of the below blog post as originally published on 12/16/24 is correct.

This is certainly not over. Join the Tax School Facebook group for the most current information and to join the more than 4,000 tax professionals having conversations about BOI and other timely issues.

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12/24/24 Update: 

On December 23, 2024, a federal Court of Appeals overturned the December 3 ruling that halted BOI filing. The preliminary nationwide injunction is now lifted and BOI filing is again mandated. FinCEN announced a delay in the filing deadline; it is now generally January 13, 2025 (rather than January 1). For now, BOI filing is once again required by all reporting companies. Many law experts anticipate either Congressional action or a Supreme Court ruling.

Thank you to Bob Rhea for the above update. Please also reference Roger McEowen’s blog article from 12/23/24 for more information.

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Blog Post as Published on 12/16/24:

For most of Fall Tax School this year, our instructors presented on information about the requirement for companies to report beneficial ownership information (BOI) before and on January 1, 2025. However, the status of these requirements changed on December 3, 2024, when a district court in Texas issued a nationwide preliminary injunction suspending the filing requirement. The U.S. Department of Justice appealed, and on December 6, 2024, the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) posted the following notice on their website:

FinCEN Alert: Impact of Ongoing Litigation – Deadline Stay – Voluntary Submissions Only

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.

The Corporate Transparency Act (CTA) plays a vital role in protecting the U.S. and international financial systems, as well as people across the country, from illicit finance threats like terrorist financing, drug trafficking, and money laundering.  The CTA levels the playing field for tens of millions of law-abiding small businesses across the United States and makes it harder for bad actors to exploit loopholes in order to gain an unfair advantage.

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 in the Eastern District of Texas, Sherman Division, issued an order granting a nationwide preliminary injunction that: (1) enjoins the CTA, including enforcement of that statute and regulations implementing its beneficial ownership information reporting requirements, and, specifically, (2) stays all deadlines to comply with the CTA’s reporting requirements. The Department of Justice, on behalf of the Department of the Treasury, filed a Notice of Appeal on December 5, 2024.

Texas Top Cop Shop is only one of several cases in which plaintiffs have challenged the CTA that are pending before courts around the country. Several district courts have denied requests to enjoin the CTA, ruling in favor of the Department of the Treasury. The government continues to believe—consistent with the conclusions of the U.S. District Courts for the Eastern District of Virginia and the District of Oregon—that the CTA is constitutional.

While this litigation is ongoing, FinCEN will comply with the order issued by the U.S. District Court for the Eastern District of Texas for as long as it remains in effect. Therefore, reporting companies are not currently required to file their beneficial ownership information with FinCEN and will not be subject to liability if they fail to do so while the preliminary injunction remains in effect. Nevertheless, reporting companies may continue to voluntarily submit beneficial ownership information reports.

Summary from University of Illinois Tax School

With this direct response from FinCEN, practitioners may inform their affected clients of the current suspension of the requirement to file BOI reports. While businesses have the ability to file or continue to file such BOI reporting, they are currently not required to do so. As the preliminary injunction has no set duration and the outcome of appeals remain uncertain, information and requirements related to this matter are subject to change. We will continue to monitor the status of this case and will provide updates as more information about actionable next steps becomes available. Any relevant updates to the Corporate Transparency Act and BOI reporting will be included in the upcoming Get Ready for Filing Season webinar on January 30, 2025.