Key Takeaways
- Questioning Corporate Transparency Act's Constitutionality, District Court halted enforcement earlier in December.
- On December 23, Fifth Circuit panel announced that enforcement could resume.
- FinCEN announced new reporting deadlines.
- On December 26, Fifth Circuit said it would review panel holding, and put the enforcement halt back in place.
UPDATE, December 27: Yesterday a Fifth Circuit order restored the ban on enforcing the Corporate Transparency Act's beneficial ownership requirements, pending another hearing. More coverage here.
Prior coverage below.
Just in time for the holidays, a federal appeals court has restored the requirement for businesses to disclose their beneficial owners.
The Fifth Circuit Court of Appeals earlier today reversed the nationwide injunction that had prevented the Financial Crimes Enforcement Network (FinCEN) from enforcing rules requiring business entities to disclose their ownership. The now-overturned injunction was granted after a lower court found that the reporting requirement was likely to be found unconstitutional.
From the Fifth Circuit order (citations omitted):
On the first factor, the government has made a strong showing that it is likely to succeed on the merits in defending CTA’s constitutionality. When Congress passed the bipartisan statute in 2021, it used its “broad authority under the Commerce Clause” to regulate economic activity. As stated, the CTA requires certain corporate entities to report their beneficial ownership interest in order to target illicit financial activity. In doing so, it regulates anonymous ownership and operation of businesses. Those “are part of an economic class of activities that have a substantial effect on interstate commerce.” Thus, a reporting requirement for entities engaged in these economic activities falls within “more than a century of [the Supreme] Court’s Commerce Clause jurisprudence.”
This means that the January 1, 2025 deadline is back in effect for businesses formed before 2024 to report their beneficial ownership.
The continuing resolution spending legislation passed by Congress last week originally included a one-year delay in the reporting requirements, but that was stripped from the bill before passage.
The FinCEN website has not been updated with news on the ruling as this is written. It is possible that they might provide a grace period for filing now as a result of the litigation, but then again, they might not.
UPDATE: FinCEN updated their BOI page December 23 to report modified deadlines after the injunction was lifted:
- 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.
Other coverage: BOI Injunction Stayed by the 5th Circuit (Thomas Gorczynksi, Tom Talks Taxes)
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