FinCEN is offering advisors and businesses a little breathing room.
gettyJust before the holidays, a unanimous Fifth Circuit bench granted the government’s emergency motion to continue to enforce the Corporate Transparency Act (CTA). The ruling means that the preliminary nationwide injunction—which prevented the government from requiring companies to file beneficial ownership information (BOI) reports—is no longer in force.
In response, FinCEN posted a message to its website, extending the deadline.
Under the law as written, a reporting company created or registered to do business before January 1, 2024, will have until January 1, 2025, to file its initial report. This is true even if the company was created years before 2024. That deadline has been extended to January 13, 2025.
A reporting company created or registered on or after January 1, 2024, and before January 1, 2025, will have 90 calendar days after receiving notice of the company's creation or registration to file its initial report. However, under the relief granted by FinCEN, reporting companies created or registered on or after September 4, 2024, with a filing deadline between December 3, 2024 and December 23, 2024 now have until January 13, 2025 to file. Additionally, reporting companies created or registered on or after December 3, 2024 and on or before December 23, 2024 have an additional 21 days to file.
Reporting companies that qualify for disaster relief may have extended deadlines that fall beyond January 13, 2025. According to FinCEN, these companies should abide by whichever deadline falls later.
(For more on the reporting requirements, see this previous article.)
FinCEN also confirmed that plaintiffs in National Small Business United v. Yellen—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.
The last minute maneuvering has given some advisors and businesses whiplash—or at least a big headache.
Previous History
In Texas Top Cop Shop, Inc., et al. v. Garland, et al., Judge Amos Mazzant, an Obama appointee, granted the request of the National Federation of Independent Business (NFIB) for a preliminary injunction, blocking the U.S. Department of Treasury from enforcing the CTA's reporting requirements. Because NFIB and its nearly 300,000 members were a party to this case, the judge blocked enforcement of the BOI reporting requirements nationwide.
In response to the initial ruling, FinCEN posted a statement on its website that “[t]he 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.”
Nonetheless, FinCEN stated, "While this litigation is ongoing, FinCEN will comply with the order issued by the U.S. District Court for the Eastern District of Texas for as long as it remains in effect." The agency added that "reporting companies may continue to voluntarily submit beneficial ownership information reports."
On December 17, 2024, on appeal, Mazzant ruled that a nationwide preliminary injunction barring FinCEN from enforcing the Corporate Transparency Act (CTA) would stand. Mazzant had previously granted the plaintiffs’ request for a preliminary injunction, blocking the U.S. Department of Treasury from enforcing the CTA's reporting requirements.
Latest Maneuvers
The government appealed to the Fifth Circuit. In a December 23, 2024 ruling, a unanimous Fifth Circuit bench granted the government’s emergency motion for a stay pending the appeal.
In the opinion, Circuit Judges Stewart, Haynes, and Higginson poked holes at the district court ruling, writing, “Independently, the government has made a strong showing against the Businesses’ facial challenge to the CTA.” That means, the court wrote “Here, the CTA at least operates constitutionally when it requires that corporations engaged in business operations affecting interstate commerce disclose their beneficial owner and applicant information to the Department of the Treasury’s Financial Crimes Enforcement Network (“FinCEN”),” before concluding, “Thus, the statute is likely constitutional on its face.”
The panel had no sympathy for fears of a last-minute scramble, writing, “The Businesses warn that lifting the district court’s injunction days before the compliance deadline would place an undue burden on them. They fail to note, however, that they only filed suit in May 2024 and the district court’s preliminary injunction has only been in place for less than three weeks as compared to the nearly four years that the Businesses have had to prepare since Congress enacted the CTA, as well as the year since FinCEN announced the reporting deadline.”
You can read the order here.
FinCEN Response
A FinCEN spokesperson said in a statement to Forbes that the most recent decision “underscores the importance and urgency of the Corporate Transparency Act for national security.”
“The Corporate Transparency Act 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 statement continued. “The Corporate Transparency Act 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.”
With a nod to the fact that the matter is far from over, the spokesperson added, “We continue to believe that the law is constitutional and will continue to pursue an appeal.”
Other Court Rulings
The Top Shop case isn't the only case pending in the courts. In addition to National Small Business United v. Yellen referenced by FinCEN above, two other courts—the United States Court of Appeals for the Fourth Circuit and the United States Court of Appeals for the Ninth Circuit—also have CTA case appeals on their dockets.
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