DECEMBER 27, 2024 UPDATE
Impact of Ongoing Litigation – Deadline Stay – Voluntary Submission Only
In light of a recent federal court order, reporting companies are not currently required to file beneficial ownership information with FinCEN and are not subject to liability if they fail to do so while the order remains in force. However, reporting companies may continue to voluntarily submit beneficial ownership information reports.
The Corporate Transparency Act (CTA) plays a vital role in protecting the U.S. and international financial systems, as well as people across the country, from illicit finance threats like terrorist financing, drug trafficking, and money laundering. The CTA levels the playing field for tens of millions of law-abiding small businesses across the United States and makes it harder for bad actors to exploit loopholes in order to gain an unfair advantage.
On Tuesday, December 3, 2024, in the case of Texas Top Cop Shop, Inc., et al. v. Garland, et al., No. 4:24-cv-00478 (E.D. Tex.), the U.S. District Court for the Eastern District of Texas, Sherman Division, issued an order granting a nationwide preliminary injunction. Texas Top Cop Shop is only one of several cases that have challenged the Corporate Transparency Act (CTA) pending before courts around the country. Several district courts have denied requests to enjoin the CTA, ruling in favor of the Department of the Treasury. The government continues to believe—consistent with the conclusions of the U.S. District Courts for the Eastern District of Virginia and the District of Oregon—that the CTA is constitutional. For that reason, the Department of Justice, on behalf of the Department of the Treasury, filed a Notice of Appeal on December 5, 2024 and separately sought of stay of the injunction pending that appeal.
On December 23, 2024, a panel of the U.S. Court of Appeals for the Fifth Circuit granted a stay of the district court’s preliminary injunction entered in the case of Texas Top Cop Shop, Inc. v. Garland, pending the outcome of the Department of the Treasury’s ongoing appeal of the district court’s order. FinCEN immediately issued an alert notifying the public of this ruling, and recognizing that reporting companies may have needed additional time to comply with beneficial ownership reporting requirements, FinCEN extended reporting deadlines. On December 26, 2024, however, a different panel of the U.S. Court of Appeals for the Fifth Circuit issued an order vacating the Court’s December 23, 2024 order granting a stay of the preliminary injunction. Accordingly, as of December 26, 2024, the injunction issued by the district court in Texas Top Cop Shop, Inc. v. Garland is in effect and reporting companies are not currently required to file beneficial ownership information with FinCEN.
DECEMBER 23, 2024 UPDATE
FinCEN just issued the following: In light of a December 23, 2024, federal Court of Appeals decision, reporting companies, except as indicated below, are once again required to file beneficial ownership information with FinCEN. However, because the Department of the Treasury recognizes that reporting companies may need additional time to comply given the period when the preliminary injunction had been in effect, we have extended the reporting deadline as follows:
• Reporting companies that were created or registered prior to January 1, 2024 have until January 13, 2025 to file their initial beneficial ownership information reports with FinCEN. (These companies would otherwise have been required to report by January 1, 2025.)
• Reporting companies created or registered in the United States on or after September 4, 2024 that had a filing deadline between December 3, 2024 and December 23, 2024 have until January 13, 2025 to file their initial beneficial ownership information reports with FinCEN.
• Reporting companies created or registered in the United States on or after December 3, 2024 and on or before December 23, 2024 have an additional 21 days from their original filing deadline to file their initial beneficial ownership information reports with FinCEN.
• Reporting companies that qualify for disaster relief may have extended deadlines that fall beyond January 13, 2025. These companies should abide by whichever deadline falls later.
• Reporting companies that are created or registered in the United States on or after January 1, 2025 have 30 days to file their initial beneficial ownership information reports with FinCEN after receiving actual or public notice that their creation or registration is effective.
• As indicated in the alert titled “Notice Regarding National Small Business United v. Yellen, No. 5:22-cv-01448 (N.D. Ala.)”, Plaintiffs in National Small Business United v. Yellen, No. 5:22-cv-01448 (N.D. Ala.)—namely, Isaac Winkles, reporting companies for which Isaac Winkles is the beneficial owner or applicant, the National Small Business Association, and members of the National Small Business Association (as of March 1, 2024)—are not currently required to report their beneficial ownership information to FinCEN at this time.
On Tuesday, December 3, 2024, in the case of Texas Top Cop Shop, Inc., et al. v. Garland, et al., No. 4:24-cv-00478 (E.D. Tex.), the U.S. District Court for the Eastern District of Texas, Sherman Division, issued an order granting a nationwide preliminary injunction. On December 23, 2024, the U.S. Court of Appeals for the Fifth Circuit granted a stay of the district court’s preliminary injunction enjoining the Corporate Transparency Act (CTA) entered in the case of Texas Top Cop Shop, Inc. v. Garland, pending the outcome of the Department of the Treasury’s ongoing appeal of the district court’s order. Texas Top Cop Shop is only one of several cases that have challenged the CTA pending before courts around the country. Several district courts have denied requests to enjoin the CTA, ruling in favor of the Department of the Treasury. The government continues to believe—consistent with the conclusions of the U.S. District Courts for the Eastern District of Virginia and the District of Oregon—that the CTA is constitutional. For that reason, the Department of Justice, on behalf of the Department of the Treasury, filed a Notice of Appeal on December 5, 2024 and separately sought of stay of the injunction pending that appeal with the district court and the U.S. Court of Appeals for the Fifth Circuit.
We are committed to keeping you informed of any legal developments and are here to support you through the process. If you have any questions or need assistance with the filing, please don’t hesitate to contact us at Chase Law Group or call us at 310-545-7700.
DECEMBER 2, 2024 UPDATE
As we approach the end of the year, we are reaching out to remind you of the upcoming deadline for compliance with the Corporate Transparency Act (CTA). Although the CTA has been challenged in court, it continues to apply to most businesses. The ruling from the federal district court in the Northern District of Alabama, issued earlier this year in National Small Business United v. Yellen (March 1, 2024), temporarily halted enforcement of the CTA for certain plaintiffs in that case. However, this ruling does not affect the majority of business owners.
The Financial Crimes Enforcement Network (FinCEN) issued a notice confirming that the CTA enforcement is paused only for the plaintiffs involved in that case. For all other businesses, the CTA remains in full effect, and the government has indicated it will appeal the ruling. The deadline to file your Beneficial Ownership Information Report (BOIR) is still set for December 31, 2024 for entities that existed prior to January 1, 2024.
What Does This Mean for You?
If your business was established before 2024, you must submit the BOIR by December 31, 2024. The failure to file can result in severe penalties, making it essential to act before the year ends.
At Chase Law Group, we are offering a flat rate of $500 to file the BOIR for existing clients, or $250 if you are enrolled in one of our compliance packages. This is an important step to ensure you remain in good standing and avoid any potential fines.
How We Can Help
During your annual entity review, we will reach out to confirm whether you would like us to handle the filing of the BOIR for your business. If you prefer to wait until later in the year, we will keep track of your preferences and follow up with you as the deadline approaches.
For those who opt to delay, we will not take any action to gather the information or submit the report until we receive confirmation. Rest assured, you will not be charged until the report is filed.
Don’t Miss the Deadline
Even with the court’s ruling and the potential appeal, it is unlikely that the CTA will be fully invalidated in the near future. The penalties for non-compliance can be significant, so we strongly recommend moving forward with the filing to ensure your business remains compliant.
We are committed to keeping you informed of any legal developments and are here to support you through the process. If you have any questions or need assistance with the filing, please don’t hesitate to contact us at Chase Law Group or call us at 310-545-7700.
Let us help you navigate this important compliance requirement before the December 31st deadline!
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Please note that this article is for informational purposes only and should not be considered legal advice and does constitute an attorney-client relationship. It is recommended to consult with an attorney and your insurance carrier directly for specific guidance pertaining to your business and its practices.