Update: Corporate Transparency Act Enforcement and Beneficial Ownership Reporting
Last week, we shared insights on the preliminary injunction halting the enforcement of the Corporate Transparency Act (CTA). The U.S. Department of Justice has since filed an appeal and we have new guidance from FinCEN on CTA enforcement, signalling the evolving BOI reporting requirements.
DOJ Appeals the Injunction
On December 5, 2024, the DOJ formally appealed the court’s preliminary injunction to the U.S. Court of Appeals for the Fifth Circuit. This injunction, issued on constitutional grounds, temporarily blocks the enforcement of the CTA’s reporting requirements.
While two courts have raised constitutional concerns about the CTA, other rulings—such as those from the U.S. District Courts for the Eastern District of Virginia and the District of Oregon—have upheld its constitutionality. A pending decision from a Texas court could further influence this rapidly evolving legal landscape.
FinCEN’s New Guidance
On December 7, 2024, FinCEN responded to the injunction by issuing a notice clarifying the current state of reporting obligations:
- No Current Requirement: Reporting companies are not required to file BOI reports with FinCEN while the injunction remains in effect.
- No Liability: Companies will not face penalties for failing to file during this period.
- Voluntary Reporting Encouraged: FinCEN invites reporting entities to voluntarily submit BOI reports, even though it’s not mandatory at this time.
FinCEN also reiterated the importance of staying prepared to comply should the injunction be lifted.
What Businesses Need to Know
The ongoing appeal and FinCEN’s guidance signal a dynamic and uncertain regulatory environment. Here’s how businesses should respond:
- Stay Informed: Legal obligations could change quickly if the Fifth Circuit or Supreme Court stays the injunction. Monitoring updates is crucial.
- Prepare for Compliance: Despite the temporary reprieve, reporting entities should continue to gather and finalize the necessary BOI information. This ensures readiness to file reports promptly if the injunction is overturned.
- Consult Tax/Legal Advisors: With multiple court rulings and appeals, understanding your entity’s obligations under the CTA is complex. Seek expert guidance to navigate this uncertainty effectively.
What’s Next?
Businesses subject to the CTA should leverage this interim period to ensure they are well-prepared for any potential reinstatement of enforcement.
As your trusted advisors, Andersen will continue monitoring these developments and provide timely updates to ensure your business is compliance and well positioned for any changes ahead.
For more information or assistance with compliance planning, please contact our team.
Andersen Canada Contact
 | Namir Hallak CPA, CA, CPA (Kansas), CGMA |
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