The suspension comes weeks before the January 1, 2025, BOI reporting deadline.

December 09, 2024

On December 3, the U.S. District Court for the Eastern District of Texas issued an order temporarily suspending enforcement of the Corporate Transparency Act (31 U.S.C. § 5336 and its implementing Reporting Rule, 31 C.F.R. § 1010.380, collectively, the CTA), which requires certain U.S. entities and foreign entities registered to do business in the United States (collectively, reporting companies) to submit beneficial ownership information (BOI) reports to the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN).

This means that small businesses, at least for now, do not have to make new filings with the federal government about who owns them, which was a significant requirement imposed on millions of small businesses in the U.S.

[NACS explained the implications of the new rule earlier this year.]

In the case, plaintiffs alleged the CTA represents an unconstitutional expansion of federal power, threatens privacy and associational interests, and violates individual rights. The U.S. government argued the CTA is intended to enhance federal agencies’ ability to protect the U.S. financial system from illicit use. The Court agreed with the plaintiffs, finding they were likely to prevail on their argument that the CTA exceeded Congress’ enumerated powers, declining to reach the other grounds for challenge.

The Court granted plaintiffs’ request for a preliminary injunction pending final resolution of the case on the grounds that the statute was likely unconstitutional.

Read more about the injunction at Bloomberg Tax.

Unlike NSBU v. Yellen, a similar Alabama district court decision that remains pending before the Eleventh Circuit, the Texas decision provides nationwide relief, stating that “reporting companies need not comply with the CTA’s January 1, 2025, BOI reporting deadline pending further order of the Court.”

The Court reserved a final ruling on the constitutionality of the CTA for another day. For now, it found plaintiffs met their burden to establish the four elements for issuance of a preliminary injunction.

The U.S. government has 60 days to appeal the injunction. For now, and with the injunction in force, reporting companies are not required to report beneficial ownership information to FinCEN, but should continue to work through their analyses and forms to be prepared to comply with the CTA by the filing deadline in case the nationwide injunction is stayed, lifted or otherwise made ineffective.