In Brief: FinCEN Confirms Suspension of Corporate Transparency Act Filing Obligations During Nationwide Injunction
On December 7, 2024, the US Financial Crimes Enforcement Network (FinCEN) confirmed that reporting companies—i.e., companies that would be required to report their beneficial ownership information to FinCEN under the Corporate Transparency Act (CTA) and its implementing regulations—are not required to file beneficial ownership reports for as long as the current, nationwide injunction of the CTA remains in effect.1 Further, FinCEN noted that reporting companies will have no liability for failing to file required beneficial ownership reports during the pendency of the injunction. FinCEN will continue to accept beneficial ownership reports from reporting companies on a voluntary basis.
Background
FinCEN’s statement follows a nationwide preliminary injunction suspending enforcement of the CTA and its implementing regulations and concluding that the CTA is likely unconstitutional. The preliminary injunction was entered on December 3, 2024, by the US District Court for the Eastern District of Texas.2 (We discussed the Texas case and the court’s order in more detail in a separate Legal Update, “Federal Court Suspends Enforcement of Corporate Transparency Act Nationwide.”) The US Department of Justice, on behalf of FinCEN, has since appealed the injunction to the US Court of Appeals for the Fifth Circuit.
Some Uncertainty Resolved
FinCEN’s statement appears to resolve some uncertainty as to the application of the Texas court’s order. While the order enjoined enforcement of the CTA and its implementing regulations in their entirety and stayed the compliance deadline, the order only expressly addressed the January 1, 2025, compliance deadline, which applied to reporting companies formed or registered prior to January 1, 2024. For reporting companies formed on or after January 1, 2024, the applicable compliance deadline under the CTA’s implementing regulations is either 90 or 30 days following the formation or registration of the reporting company, depending on whether the reporting company is established in 2024 or 2025. Since the order did not expressly address these compliance deadlines, reporting companies formed or registered beginning in 2024 were left to consider whether they would be at risk of a penalty for failing to comply during the duration of the injunction. In its statement, FinCEN appears to interpret the court’s order as specifically “stay[ing] all deadlines to comply with the CTA’s reporting requirements,” and thus FinCEN’s statement is broadly applicable to all reporting companies.
Close Monitoring Required
While FinCEN’s statement confirms that 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,” reporting companies that do not file beneficial ownership reports should closely monitor the status of the Texas case for further action by the court or the Fifth Circuit and for any further guidance from FinCEN on compliance obligations if and when the injunction is dissolved.
1 See Beneficial Ownership Information, FinCEN, https://fincen.gov/boi (last accessed Dec. 8, 2024).
2 Texas Top Cop Shop, Inc., et al v. Garland et al, No. 4:24-cv-00478 (E.D. Tex. Dec. 3, 2024).
