CAUTION SUPERSEDED - THE INFORMATION IN THE FOLLOWING POST HAS BEEN SUPERSEDED BY SUBSEQUENT DEVELOPMENTS IN THE UNDERLYING COURT CASE AND SHOULD NO LONGER BE RELIED UPON 

Beneficial Ownership Information Reporting Requirements Halted

The Corporate Transparency Act (CTA), which included a 12/31/24 deadline requiring numerous U.S. business entities to report stakeholder information to the Treasury Department, was blocked nationwide by a Texas federal court last week.

The law is designed to make it harder for people to hide or benefit from ill-gotten gains through shell companies or similar entities from illicit activities like tax fraud, money laundering and other financial crimes.

Qualifying companies formed prior to Jan. 1, 2024, had been required to report “Beneficial Ownership Information (BOI)” to the Financial Crimes Enforcement Network (FinCEN), a bureau of the U.S. Department of the Treasury, by year’s end. However, Texas Federal District Court Judge Amos L. Mazzant III issued an injunction at the request of a family-run firearms and tactical gear retailer as well as the Libertarian Party of Mississippi. The lawsuit alleged that the CTA falls outside Congress’ authority to regulate interstate commerce because it regulates incorporated entities regardless of whether they engage in commercial activity. Judge Mazzant agreed with the Plaintiffs, calling the law unprecedented and unconstitutional.

The National Small Business Association, which had also filed suit due to confusion and concerns about the reporting requirements, celebrated the ruling and encouraged Congress to repeal the legislation.

However, others strongly support the law, including the anti-corruption coalition Transparency International and various law enforcement and terrorist monitoring agencies. Thus, additional legal challenges are likely to occur.

“There are a lot of unknowns that will require us to monitor this carefully,” said Colligan Law Managing Partner Matthew Pelkey. ”Entities which already completed their BOI filings have no reason to be concerned. However, those which have not done so should be prepared to in fairly short order, in case the injunction is overturned.”

If you have questions about this development or anything related to your rights regarding CTA requirements, the BOI reporting process, or business law in general, feel free to contact the Colligan Law team at 716- 885-1150 for assistance.