Updated to reflect Department of Justice appeal and FinCEN response
On December 3, 2024, a federal court in Texas issued a preliminary injunction temporarily halting the enforcement of the Corporate Transparency Act (CTA) and its accompanying beneficial ownership reporting rule. This means that businesses subject to the CTA, including investment managers, funds, and related entities, are not required to comply with the reporting obligations. The Department of Justice appealed the ruling December 5, prompting a posted statement from the U.S. Financial Crimes Enforcement Network (FinCEN) to its website on December 7. In sum, FinCEN noted that, because of the court’s order, “reporting companies are not currently required to file their beneficial ownership information with FinCEN and will not be subject to liability if they fail to do so while the preliminary injunction remains in effect. Nevertheless, reporting companies may continue to voluntarily submit beneficial ownership information reports.” FinCEN also noted the appeal filed by the Department of Justice.
Key Takeaways
- Enforcement Stay: The court’s ruling temporarily prevents enforcement of the CTA, meaning companies, including investment managers and their funds, are not required to file beneficial ownership information (BOI) reports at this time (Reporting Rule).
- Voluntary Filing: Companies can still voluntarily submit BOI reports to FinCEN
- Government Appeal: The DOJ appeal could lead to a reversal of the stay.
Uncertainty Remains
While the CTA is on hold, it’s crucial to recognize that the situation is fluid. Businesses should monitor the case closely and be prepared to comply with the CTA’s requirements if necessary. If the government’s appeal is successful, it could mean a scramble for companies to quickly comply with the Reporting Rule’s requirements.
Our Recommendations
- Monitor legal developments: Keep track of any updates from the courts and FinCEN.
- Consult with legal counsel: Seek advice from legal experts to understand your specific obligations and potential risks.
- Prepare for potential compliance: If the CTA is reinstated, be ready to gather necessary information and file BOI reports promptly. You may also consider assembling all necessary information now to save time should the stay be removed and the CTA reinstated.
By staying informed and taking proactive steps, businesses can mitigate the risks associated with the CTA and ensure compliance with evolving regulations.
Should you have any questions about the impact of the Texas federal court ruling, stay or related concerns, please contact Jeff Rambach or your Practus, LLP attorney.
