UPDATED: the Fifth Circuit US Court of Appeals reversed this injunction on December 23, 2024 and has REINSTATED the BOI reporting requirements.

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Nationwide Injunction on BOI Reporting

Earlier this week, a federal district court in Texas* ruled that the Corporate Transparency Act (CTA) is likely unconstitutional and issued an order prohibiting the enforcement of the beneficial ownership information (BOI) reporting rule in the CTA’s accompanying regulations.

       * Texas Top Cop Shop, Inc. vs. Garland, No. 4:24-CV-478 (E.D. Texas 12/3/24)

The court chose to apply this injunction nationally, and not just to Texas.

The CTA and the BOI reporting rule cannot be enforced, and reporting companies need not comply with the CTA’s Jan. 1, 2025, BOI reporting deadline pending a further order of the court.

 

Government Response

We do not know how the government will respond. A simple appeal would move the case to the Fifth Circuit. The preliminary injunction likely would remain in effect through the appeal process or until the court issues another order.

Alternatively, the government could seek an expedited stay order from the Fifth Circuit and have the injunction lifted while the case is appealed.

 

Considerations

It should be noted that law enforcement has long supported the disclosures as an important weapon needed to combat financial crimes.

The stated purpose of the BOI reporting is good. We want to do our part in supporting law enforcement agencies and helping secure our state and national interests.

The issue has been the heavy-handed and burdensome approach in the CTA’s implementation of these rules, including burdensome deadlines and penalties.

 

Your Next Step

The injunction is most likely not the final outcome.

An additional option is that the CTA will address the issues, obtain clear authority and provide extended deadlines. BOI reporting may very well be required this next year.

If you have already filed your BOI report, you are ahead of the curve. The information is not invasive and may contribute to fighting criminal activities.

If your entity meets the reporting requirements, it would be prudent to be prepared. Assess the beneficial ownership requirements, gather the information and documentation. Either have the report ready to file, or go ahead and file it sooner than later.