Key Takeaways:

• A nationwide injunction prohibiting enforcement of the CTA was imposed on December 3.
• FinCEN issued a statement that made BOI reporting voluntary while the injunction is in force.
• The government has appealed and requested that the court stay its preliminary injunction or narrow the scope to cover only the plaintiff by December 27.
• Things are moving quickly as the original filing deadline of January 1, 2025 approaches, and there is significant uncertainty regarding the ultimate filing obligations.

The Corporate Transparency Act (CTA) requires certain companies – including most small businesses – to provide information regarding beneficial ownership and control. The CTA is part of the Bank Secrecy Act, which is a set of federal laws that require record-keeping and reporting on certain types of financial transactions. The CTA requires disclosure of the beneficial ownership information (BOI) of certain entities from individuals who own or control a company. The intent of the BOI reporting is to help U.S. law enforcement combat money laundering, the financing of terrorism, and other illicit activity.

Earlier this month, a federal district court in Texas ruled that the CTA is likely unconstitutional and imposed a nationwide injunction that prohibits enforcement of the CTA and its BOI reporting requirements. In response, the Financial Crimes Enforcement Network (FinCEN), the agency charged with enforcement of the CTA, indicated that Reporting Companies are not required to report BOI to FinCEN, and are not subject to liability if they fail to report BOI while the injunction remains in force. FinCEN will continue to accept BOI reports from companies who voluntarily choose to submit them.

The federal government has filed an appeal and is seeking a stay of the injunction, or a reduction in scope that would limit the injunction to the members of the plaintiff in the case (the National Federation of Independent Businesses). The court is expected to issue a ruling before the end of the year on whether the nationwide injunction will stand, will partially stand (e.g., with a narrower scope), or be fully revoked.

Prior to the injunction, the filing deadline for companies in existence prior to January 1, 2024, was January 1, 2025. If a decision to lift or narrow the injunction is made before then, the filing deadline may not be modified. Accordingly, each Reporting Company needs to weigh the risks of reporting or not reporting as the litigation continues to play out. Should you decide to wait, you will need to closely monitor ongoing developments. While FinCEN has made clear that companies will not be subject to fines while the injunction remains in force, it is unclear whether the filing deadlines will be delayed if the injunction is lifted. Therefore, it would be prudent to ensure you are prepared to act quickly if reporting requirements are reinstated.

Further information about the CTA, BOI reporting requirements, and other important updates can be found on FinCEN’s BOI webpage.

Please note that the CTA falls within Title 31 (Money and Finance) of the United States Code, distinct from Title 26 (Internal Revenue Code). Regulatory authority currently permits accountants limited authority to interpret tax law exclusively under Title 26. The extent of their authority to interpret Title 31 remains unclear. Consequently, services a CPA provides in connection with the CTA may be deemed the unlicensed practice of law. Accordingly, assisting with BOI reporting matters is outside the scope of services JTaylor is authorized to provide. We advise that you consult with qualified legal counsel if you need assistance understanding your filing requirements.

While we are precluded from providing advice regarding whether specific entities are subject to the BOI reporting requirements, contact one of the following members of our team if you have questions or need assistance finding resources:

• Marc Geisler, CPA – 817.502.7722 / mgeisler@jtaylor.com
• Pam Roberts, CPA – 817.502.7730 / proberts@jtaylor.com
• Timothy Liggett, CPA – 817.502.7737 / tliggett@jtaylor.com