I truly thought my hiatus from Corporate Transparency Act blog posts was going to run longer than this. However, recent events compelled the original three-part series (see those original parts here, here, and here) to grow into four parts.
So, what’s all the hubbub?
On March 1, 2024, the U.S. District Court for the Northern District of Alabama granted an injunction sought by the National Small Business Association [NSBA] to prevent the Financial Crimes Enforcement Network (FinCEN) within the U.S. Department of Treasury from enforcing the Beneficial Ownership Information [BOI] reporting requirements under the Corporate Transparency Act. In his written judicial opinion, Judge Burke ruled that Congress did not have enumerated constitutional authority to impose the reporting requirements called for under the Corporate Transparency Act. In plain English, this federal judge ordering FinCEN to stop enforcing the BOI reporting requirements because Congress did not have the constitutional authority to impose those requirements in the first place.
You might be thinking, “Cool! No BOI reporting anymore, right?” Not so fast!
The dust has still not fully settled on this matter. First, FinCEN clarified in a March 4th press release that the injunction only prevented it from enforcing the reporting requirements against the NSBA and its members specifically. Reading between the lines, that means that if someone is a beneficial owner of a company and not a member of NSBA, FinCEN’s position seems to be that the reporting requirements are still in effect. Second, all signs point toward the Treasury Department appealing this decision to the 11th Circuit (the next level of appeal). The 11th Circuit could reverse the ruling granting the injunction, or at least stay (temporarily stop) the injunction pending the outcome of the appeal.
Based on these recent developments, I think these are the takeaways:
- The issue of the Corporate Transparency Act and its constitutionality is not a settled question. With that in mind, if the Act would require you to report, it would still be wise to be prepared to report, especially considering the potential penalties for non-compliance.
- For any companies formed prior to January 1, 2024, December 31, 2024 is still the stated reporting deadline. That does give you some time to let the dust settle if this Point 2 applies to you. That said, if you choose to ignore Point 1, you might do so at your own peril.
- When in doubt, talk to your attorney. The interplay between regulatory requirements and federal litigation can be a complex one. Your attorney can be a trusted advisor as you try to chart a course ahead for you and your business.
Thanks for reading!
Sam