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Less than a month before a Jan. 1, 2025, deadline for businesses to report their beneficial owners to the Financial Crimes Enforcement Network (FinCEN), a federal judge in Texas has issued a preliminary injunction blocking enforcement of the requirement. The order states that covered companies nationwide do not need to comply with the Jan. 1 reporting deadline, UNLESS the judge or a higher court reverses the order in the meantime.
The lawsuit, brought by the National Federation of Independent Business and several of its members, challenged the constitutionality of the Corporate Transparency Act, the 2021 bill that established a beneficial ownership information, or BOI, registry and the requirement for businesses to report. The plaintiffs argued that the CTA exceeded Congress’ authority to regulate interstate commerce, that it violates the First Amendment by compelling speech and infringing freedom of association, and that it violates the Fourth Amendment by forcing the disclosure of private information.
By mid-November, as the initial Jan. 1 reporting deadline approached, only about a quarter of the estimated 32.5 million covered businesses had registered. According to newly released poll data from Wolters Kluwer, 37% of firms were waiting until closer to the deadline and 12% said they had insufficient resources to do the filing. Meanwhile, 9% of businesses believed they were not covered by the rule, and 32% were unsure whether the rule applied to them.
What does this mean for you and your organization?
If you have any business entities that may have a BOI filing requirement under these rules, the preliminary injunction means you are currently not required to comply with the reported deadline of Jan. 1, 2025. If you have already filed your report, no further action should be required. If you have not yet filed, you can consider whether to go ahead and file anyway or choose not to file.
Keep in mind, because this is a preliminary injunction, there is the risk of a higher court overruling the decision in the coming weeks, which could leave businesses with a short window of time to become compliant.
Additional updates will be posted on the NESCPA's Hot Topics page as more information becomes available.
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