The U.S. Department of Justice (DOJ) has petitioned the Supreme Court to lift a nationwide injunction that currently blocks the enforcement of the Corporate Transparency Act (CTA). Enacted in 2021, the CTA mandates that millions of companies disclose their beneficial ownership information (BOI) to the Financial Crimes Enforcement Network (FinCEN) to combat illicit financial activities.
The injunction was issued by a Texas district judge in early December, halting the implementation of the CTA just before its initial reporting deadline of January 1, 2025. The DOJ argues that the injunction is overly broad and that the government will likely succeed in defending the law’s constitutionality. They have requested that the Supreme Court, at a minimum, narrow the scope of the injunction to apply only to the plaintiffs involved in the case.
Justice Samuel Alito requested a response from the plaintiffs by January 10, 2025, and they complied by urging the Supreme Court to reject the DOJ’s request to resume enforcement. In their response, the plaintiffs argued that pausing compliance deadlines causes minimal harm to the government, especially given its three-year delay in implementing the law. They emphasized that enforcing compliance during legal review would cause irreparable harm to businesses, citing tens of billions of dollars in unrecoverable compliance costs and potential violations of First and Fourth Amendment rights related to privacy and freedom of association.
In the meantime, FinCEN has stated that while the injunction is in place, companies are not obligated to file beneficial ownership information and will not face penalties for non-compliance. However, businesses may choose to file voluntarily.
The CTA aims to enhance transparency and prevent the misuse of anonymous shell companies for activities such as money laundering and tax evasion. The ongoing legal challenges have created uncertainty for many small businesses regarding their reporting obligations. The Supreme Court’s forthcoming decision is expected to clarify the enforcement of the CTA and its requirements.
Contact your tax manager/partner at 610-687-1600 or [email protected] for additional information.
Author Christine Fisher-Guyer, CPA, Partner, provides top-notch accounting services to Stephano Slack’s clients. She currently manages tax 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]
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