BOI Reporting on Hold: What Businesses Need to Know and How to Stay Prepared

Blog Posts, Tax

A federal district court has issued a nationwide injunction preventing the enforcement of the Corporate Transparency Act (CTA) and its associated beneficial ownership information (BOI) reporting rule, citing potential constitutional violations. The ruling, part of Texas Top Cop Shop, Inc. v. Garland (E.D. Texas, December 3, 2024), halts compliance with the CTA’s January 1, 2025, BOI reporting deadline until further court action.

Key Findings:

  1. Constitutional Concerns: The court deemed the CTA “likely unconstitutional,” asserting it exceeds Congress’s power under the Commerce Clause and Necessary and Proper Clause. The CTA was criticized as a domestic enforcement tool unrelated to foreign affairs or interstate commerce.
  2. Scope of Injunction: Despite the government’s arguments against nationwide injunctions, the court applied the ruling broadly due to the extensive constitutional issues raised by the plaintiffs, including the National Federation of Independent Business (NFIB).
  3. Background: Enacted in 2021 as an anti-money laundering measure, the CTA requires businesses to disclose beneficial owners’ information. Noncompliance could result in hefty fines and imprisonment.
  4. Reactions: Advocates for small businesses, including NFIB and the National Small Business Association, praised the decision as a victory against burdensome regulations. The AICPA welcomed the potential relief for small businesses but called for further guidance and clarity from the Financial Crimes Enforcement Network (FinCEN).
  5. Future Developments: FinCEN and the Justice Department are reviewing the decision. If the government appeals, the case will proceed to the Fifth Circuit, with the injunction likely remaining in place during the appeal.

Recommendations for Business Owners

While the injunction temporarily halts BOI reporting, businesses should be ready to comply with reporting requirements if the ruling is overturned. Proactive preparation can help businesses avoid costly penalties if enforcement resumes.  For more information on these requirements and how to stay compliant, we encourage you to refer to our blog on BOI reporting. It includes guidance on the reporting rules and steps businesses can take to ensure they are ready if enforcement resumes. If this happens, companies can complete BOI reports on FinCEN’s website.

We are happy to answer your CTA and BOI reporting questions and/or assist with BOI filings. Contact your tax manager/partner at 610-687-1600 or [email protected] for additional information.

Author Christine Fisher-Guyer, CPA, Partner, has provided top-notch accounting services to Stephano Slack’s clients. She currently manages tax auditing and accounting operations at the firm and is an excellent problem solver, especially regarding client concerns. Chris can be contacted at 610-710-4729 or [email protected].

Visit Stephano Plus