Beneficial Ownership Information Reporting Once Again On Hold

In a very unusual move, the Fifth Circuit has vacated (abandoned) its own ruling of December 23, 2024 regarding enforcement of the Corporate Transparency Act ("CTA") beneficial ownership interest reporting in the Texas Top Cop Shop, Inc. v. Garland case. Filing these Beneficial Ownership Information reports ("BOI reports") (more information below) is now voluntary.

In 2021, the Corporate Transparency Act was passed, requiring most corporations and LLCs to file information about their “beneficial owners” with the Financial Crimes Enforcement Network (FinCEN), a bureau of the U.S. Department of Treasury. This Act was designed to combat money-laundering, terrorism, tax evasion and other corrupt financial activities. Existing companies had until January 1, 2025 to file beneficial ownership reports, and companies formed in 2024 had 90 days from the date of formation to file these reports.

On December 3, 2024, a federal district court in Texas filed a nationwide preliminary injunction (stop everything order) against the Corporate Transparency Act.  The plaintiffs in that suit argued that the law is unconstitutional. The judge determined that allowing beneficial owner information filings to continue while the constitutionality of the law is determined would cause "irreparable harm" to the business owners and halted enforcement of the law until the case is heard.

Texas Top Cop Shop is one of several cases pending before courts around the country that have challenged the constitutionality of the CTA. Several district courts in other states have denied requests to enjoin the CTA, ruling in favor of the Department of the Treasury.

On December 23, 2024, the U.S. Court of Appeals for the Fifth Circuit granted a stay of the district court’s preliminary injunction. This meant that the injunction stopping enforcement of the CTA was also stopped, allowing enforcement to continue. The governmental agency overseeing the BOI Report filing extended the filing deadlines until January 13, 2025 to account for the time of the stay when filing was not mandatory.

In another stunning ruling, three days later, he Fifth Circuit Court vacated its December 23rd ruling and is once again implementing a nationwide injunction against enforcement of the CTA and BOI Report filing. Its reasoning is:

The merits panel now has the appeal, which remains expedited, and a briefing schedule will issue forthwith. However, in order to preserve the constitutional status quo while the merits panel considers the parties’ weighty substantive arguments, that part of the motions-panel order granting the Government’s motion to stay the district court’s preliminary injunction enjoining enforcement of the CTA and the Reporting Rule is VACATED.

So once again, the BOI report filing is voluntary and we will all wait and see what happens.