FinCEN states that reporting is voluntary while the preliminary injunction remains in effect
The U.S. Department of Justice (DOJ) announced that it is appealing the nationwide injunction issued by a federal judge in Texas that halted enforcement of the Corporate Transparency Act (CTA) just a few weeks before the year-end deadline for millions of companies formed or registered in the U.S. to file beneficial ownership information (BOI) reports under the law’s reporting requirements.
In tandem with the appeal, the U.S. Financial Crimes Enforcement Network (FinCEN) issued a notice in which it confirms that companies are not currently required to file BOI reports, stating that reporting is voluntary during the period in which the injunction remains in effect.
Background
As outlined in a previous comprehensive alert, the CTA became effective as of January 1, 2024 and requires corporations, limited liability companies, and other entities formed or registered in the U.S. to disclose information about their beneficial owners to FinCEN unless otherwise exempt. The CTA’s implementing rules set a compliance deadline of January 1, 2025 for entities formed before January 1, 2024. Entities formed at any time during 2024 are required to file within 90 days of the date of formation or registration, while entities formed any time during 2025 and thereafter are required to file within 30 days of formation or registration.
The Texas court’s December 3ruling temporarily halts enforcement of these requirements nationwide, citing constitutional concerns and invoking judicial authority to stay all compliance deadlines.
However, the DOJ’s appeal raises the possibility that the injunction could be lifted or its scope narrowed at any time, the effect of which would reinstate the original reporting deadlines unless the courts or the government expressly grants an extension of the same.
FinCEN’s Guidance
An alert posted on FinCEN’s website provides clarity for affected companies:
- Reporting companies are not currently required to file BOI reports.
- Companies will face no penalties for noncompliance while the injunction is in place.
- Voluntary reporting remains an option and could help companies stay ahead of potential filing deadlines.
The closing paragraph of FinCEN’s alert states:
“While this litigation is ongoing, FinCEN will comply with the order ... reporting companies are not currently required to file ... and will not be subject to liability ... Nevertheless, reporting companies may continue to voluntarily submit beneficial ownership information reports.”
What’s Next?
While FinCEN’s alert provides some comfort for companies who elect not to file BOI reports while the injunction remains in effect, much uncertainty remains. Due to this uncertainty, we believe that the guidance we recently provided continues to apply. Specifically, companies should consider either:
- Comply with the filing requirements to avoid missing the deadline in the event this holding is overturned prior to January 1, 2025.
OR
- Hold off on filing, but finalize the analysis to determine whether they are exempt from filing under their CTA and, for those that are not exempt, continue to identify and gather required information relating to their beneficial owners to prepare for eventual compliance.
Companies that have already filed are in good standing and do not need to take any action at this time.
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