Deadline for Registering with FinCEN Delayed Following Preliminary Injunction
Court Decision Provides Temporary Reprieve on Filing
On December 3, 2024, the U.S. District Court for the Eastern District of Texas issued a nationwide preliminary injunction against enforcement of the Corporate Transparency Act (“CTA”) in Texas Top Cop Shop, Inc. vs. Garland, No. 4:24-CV-478 (E.D. Texas 12/3/24).
There has been much news about the deadline to comply with United States Financial Crimes Enforcement Network (“FinCEN”) rules by December 31, 2024.
As a recap, in accordance with the CTA, newly formed (or registered) corporate entities in the United States were required to submit a Beneficial Owner Report (“BOI”) to FinCEN if the corporate entity met the “Reporting Company” definition (and if it does not qualify for exemption). A Reporting Company includes corporations, limited liability companies, or other entities which are created by filing or registering a certificate of creation with a state department.
However, in light of the federal court order issued on December 3, 2024, Reporting Companies will not be required to file a BOI report with FinCEN and are not subject to liability if they fail to do so while the order remains in force. Submission of the BOI report for a Reporting Company is now being accepted on a voluntary basis.
Reporting is Optional Pending Further Action by Courts
FinCEN has issued an alert that reporting is optional following the Court Decision. A Reporting Company is not required to submit a BOI report with FinCEN while the preliminary injunction is in place. With the preliminary injunction in place, this means that a Reporting Company has two options:
1.) Voluntarily file a BOI Report with FinCEN; or
2.) Postpone filing a BOI report for now, pending further action by courts with jurisdiction over this matter.
The federal court order also stayed the impending January 1, 2025, compliance deadline for Reporting Companies created prior to January 1, 2024.
Considerations on Whether to Delay Filing
Compliance with FinCEN has created confusion and concern for Reporting Companies. In particular, if Trust has an interest in a Reporting Company, additional details must be analyzed to determine the appropriate reporting on the beneficial owners.
They delay may provide a reprieve to making such analysis, but not without risk. If you choose to delay reporting, a future decision which validates the CTA may leave little time for a reporting company to comply in a timely manner. This may create the risk of being subject to the $500 daily fine for failure to report.
In addition, if any changes are made to ownership between the date of the decision and the reactivation of the CTA, it’s possible that all changes in ownership may have to be reported. If you choose to delay reporting, it may be prudent to keep a detailed log of ownership changes, including dates, parties and ownership shares.
Contact Us For Assistance
Abelaj Law, PC is monitoring the ongoing litigation of the CTA. Please note that this federal court ruling most likely is not the affirmative final determination on the constitutionality of the CTA and further litigation is pending on this issue. Contact our experienced legal team today at 212-328-9568 to learn more.
