After a 4-week hiatus (they keep getting shorter apparently), I am back again with more updates about the Corporate Transparency Act’s (CTA) journey through federal court. For those of you tuning back in, this post relates to our firm’s series about the Corporate Transparency Act and Beneficial Ownership Information Reporting. Please follow the link here to see all our firm’s posts on this topic.
When I last posted about legal challenges to the Corporate Transparency Act in federal court (see here), the U.S. Supreme Court ordered a nationwide injunction of BOI reporting enforcement lifted, which had originally been imposed by a federal court in Texas. That order from the Supreme Court was made moot by a separate injunction in federal court in Texas. In other words, FinCEN could not enforce the BOI reporting requirements because the second nationwide injunction was still in force. As a quick aside, the injunctions from these Texas courts are separate from a federal court case in Alabama (see here), which was appealed to the 11th Circuit (the next level in the chain of appeal for federal courts in Alabama). The 11th Circuit still has yet to issue a ruling, so the injunction as it relates to the specific plaintiffs is still in force.
Back to Texas. After the Supreme Court’s decision in January, the government offered a motion to the second Texas court to stay the enforcement of the injunction until the 5th Circuit ruled on the government’s appeal of the injunction. The second Texas court granted that motion on February 17th. The order granting that motion is only 3 sentences long, so the reasoning for granting the motion is not especially clear. Reading between the lines, one could speculate that the second Texas court saw that the first Texas court was reversed on its injunction, and it was likely that the second Texas court’s order would be reversed as well. Rather than waiting for that whole process to occur, it could be the second Texas court decided to stay the injunction while the dispute worked its way through federal court. In response to the court order, FinCEN issued a notice on February 18th. In the notice, FinCEN announced that the new FinCEN reporting deadline for reporting companies would generally be March 21, 2025, though they would provide further guidance as the March 21st deadline drew close. So to recap: (i) the second Texas federal court ordered the nationwide injunction; (ii) the same court ordered its injunction to stop; and (iii) FinCEN announced a new BOI reporting deadline of March 21, 2025.
Now that an injunction related to the CTA and BOI reporting is on hold, what does that mean for the readers (especially those who are beneficial owners)? Here are some takeaways:
- FinCEN plans to enforce the reporting deadline for companies formed before January 1, 2024 (on March 21, 2025, rather than the original January 1, 2025).
- Though not explicitly stated in the notice, FinCEN likely plans to enforce deadlines for companies formed in 2024 and beyond (90 days from company formation for companies formed in 2024, and 30 days from company formation for companies formed in 2025 and onward.
- Given the upcoming deadlines, owners of reporting companies should consider preparing themselves to file BOI reports before the March 21st deadline. Though there could be further developments from either FinCEN or federal courts that could potentially delay the deadline, that is far from guaranteed.
- Getting reporting companies’ attorneys involved can help reporting companies interpret the court rulings and FinCEN notices, as well as keep them abreast of developments to assist in making informed decisions.
Thanks for reading!