Preliminary Injunction Halts Corporate Transparency Act Enforcement
On December 3, 2024, the US District Court for the Eastern District of Texas issued a nationwide preliminary injunction temporarily halting the enforcement of the Corporate Transparency Act (CTA) and related deadlines, including the January 1, 2025 BOI reporting deadline to FinCEN. Below we will discuss how the new change with the CTA impacts D.C., Maryland, Virginia, and Georgia businesses.
Questions answered in this article:
- What is the CTA?
- Who does this ruling affect?
- What caused the Court to issue the injunction?
- Do I still have to file a BOI reports by the January 1, 2025?
- Why do many legal professionals believe that the US Government will appeal the CTA injunction?
- Where can you find assistance with BOI filing?
What is the Corporate Transparency Act?
Here’s a link to our article overviewing the CTA.
The Corporate Transparency Act (CTA) was passed as part of the 2021 National Defense Authorization Act. The CTA is designed to crack down on ”ghost” or fraudulent companies that have been used for money laundering, tax evasion, and other illicit activities. To do this, the CTA collects Beneficial Ownership Information from all individuals who own 25% or more of a company, or who exercise significant control of a company (like making key decisions). Beneficial Ownership Information includes, but is not limited to, an owner’s name, address, phone number, and drivers license, thereby putting a “face” to the entity and preventing the abuse of anonymous shell companies.
So who does this ruling affect? Small to medium sized business owners are the main group who are subject to BOI reporting.
What caused the Court to issue the injunction?
The federal district court’s injunction stems from a lawsuit questioning the CTA’s constitutionality, particularly regarding potential violations of privacy and administrative overreach. Critics argue that the CTA imposes significant compliance burdens, especially on small businesses, while creating additional risks for personal data security. Proponents of the injunction contend that the law’s rapid implementation lacked adequate safeguards and clarity for businesses to navigate the compliance requirements.
Do businesses still have to file their BOI reports by the January 1, 2025 deadline?
For now, the injunction has delayed the reporting obligations, providing temporary relief for the small-to-medium sized companies preparing to comply. However, businesses should remain vigilant. It is recommended that businesses consult legal counsel to evaluate their potential obligations under the CTA and prepare for eventual enforcement, should the injunction be lifted.
IMPORTANT: Many legal professionals, including us here at LPJ Legal PLLC believe that the US Government will appeal the injunction.
If the injunction is overturned, CTA filings will still be mandatory for the affected entities outlined in this article. Here are examples of changes we may see to the CTA filing requirements:
- The CTA reporting requirements could continue as previously outlined, with reporting deadlines to remain on January 1, 2025 and no change to the requested information, or
- The CTA requirements could be narrowed down to not apply to the plaintiffs or the organizations that represent the plaintiffs in the original case. In this instance, if you do not fall into the category of “plaintiff”, you would still have to submit your BOI information by 1/1/2025 or face fines of up to $500 per day.
LPJ Legal provides assistance with navigating CTA requirements.
LPJ Legal specializes in business law, and it is our professional opinion that you continue with your BOI filings as if the deadline was on January 1, 2025. To avoid noncompliance, please do not wait until the last minute to complete this form.
LPJ Legal will continue to monitor CTA updates and provide guidance on how businesses can adapt to these evolving legal requirements. Contact our office for tailored advice on navigating the CTA, as well as all business legal matters. Visit our website, or call (202) 643-6211 to schedule a consultation.
This article is not intended to, and does not, provide legal, compliance or other advice to any individual or entity.
