Judge Blocks Federal Ownership Reporting Requirements

A federal court in Texas halted the implementation of the Corporate Transparency Act’s (CTA) beneficial ownership reporting requirements. Holding that the CTA is likely unconstitutional, the court issued a preliminary injunction barring the government from enforcing the CTA and its reporting requirements against anyone. 

Why it matters: Prior to the ruling, small businesses that met certain criteria would have had to file reports with the Department of the Treasury by January 1, 2025, or risk fines and criminal penalties.

Looking ahead: The preliminary relief will remain in effect until the conclusion of legal proceedings, at which point the court may enter a permanent injunction. In the meantime, the government will likely appeal the preliminary injunction. 

Bottom line: Unless and until an appellate court overrules or narrows the injunction, no businesses are obligated to comply with the reporting requirements.

Learn more:  What Every Small Business Needs to Know About the Corporate Transparency Act

https://www.uschamber.com/small-business/how-to-comply-with-the-corporate-transparency-act-deadline

What is the beneficial ownership information reporting process?

Reporting companies have a limited time to file their initial BOI reports:

• For qualifying reporting companies established before the above date, the filing deadline is January 1, 2025.
• Those created between January 1, 2024, and January 1, 2025, will have 90 days from either the actual notice of formation or public announcement, whichever comes first, to file.
• Businesses established on or after January 1, 2025, will have 30 days from notification or public announcement of their formation to submit their first report to FinCEN.
• Businesses must submit any corrections or updates to previously filed information within 30 days.

Two types of reporting companies will be required to submit BOI reports: domestic reporting companies, including LLCs, corporations, and other entities formed through filing with a secretary of state or a comparable office in the U.S.; and foreign reporting companies that are registered to conduct business in the United States through filing with a secretary of state or an equivalent office.

Businesses will not incur a fee for submitting their reports, and electronic forms are available on FinCEN’s website.