BOI Reporting Requirements Halted (For Now) – Corporate Transparency Act is Likely Unconstitutional 

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On December 3, 2024, the U.S. District Court for the Eastern District of Texas issued a nationwide preliminary injunction halting enforcement of the Corporate Transparency Act (CTA) and its beneficial ownership information (BOI) reporting requirements. This ruling, delivered in Texas Top Cop Shop v. Garland et al., blocks FinCEN from enforcing the law until its constitutionality is resolved.

The CTA mandates non-exempt entities formed before January 1, 2024, to report BOI by January 1, 2025. Entities formed in 2024 or later faced shorter reporting deadlines of 30 to 90 days after formation. U.S. District Judge Amos Mazzant found the CTA likely exceeds Congress’s constitutional powers under the Commerce Clause and Necessary and Proper Clause, stating it unjustifiably regulates companies based on “a fear” they might enable financial crime. He emphasized that the law lacks a sufficient connection to any enumerated federal power. While not a final ruling, the court determined a preliminary injunction was necessary to pause enforcement while the case proceeds.

This decision is the first nationwide injunction against the CTA, diverging from earlier rulings that upheld its enforcement. The Biden Administration is expected to appeal within 60 days, potentially seeking a stay of the injunction from the Fifth Circuit. If granted, the stay would reinstate reporting obligations, including the January 1, 2025, deadline. Businesses should monitor developments closely, as compliance requirements could be reinstated with little notice.

For now, entities are not required to file or update BOI reports with FinCEN. However, businesses preparing for compliance may wish to continue their analyses to be ready if the injunction is overturned. Those who have already submitted reports are in good standing and may benefit if similar state-level reporting requirements emerge.

Given the uncertainty, businesses should remain prepared to comply swiftly if required. FinCEN is expected to issue guidance on the ruling and next steps in the near term.  We will have more analysis on this issue as the litigation proceeds.