In a recent ruling, the government has been blocked from enforcing the beneficial ownership information (BOI) reporting requirements under the Corporate Transparency Act. The Fifth Circuit issued an order reversing an earlier ruling granting a stay, putting a temporary hold on the requirements. The ruling came in response to an emergency motion filed by the government, arguing for an immediate stay pending an appeal. The court found that the government made a strong showing against the challenges to the CTA, indicating that the statute is likely constitutional on its face.
Following the December 23 ruling, FinCEN extended the reporting deadline for certain reporting companies created or registered before January 1, 2024. This extension granted relief to companies created or registered after September 4, 2024, giving them additional time to file their initial reports. FinCEN also confirmed that certain plaintiffs in the National Small Business United v. Yellen case are not currently required to report their beneficial ownership information. The order caught many by surprise, with reactions ranging from disbelief to relief to anger.
In a surprise ruling on December 26, the Fifth Circuit vacated the part of the earlier order that stayed the injunction, allowing it to be reinstated. This means that the temporary hold on the BOI reporting requirements is back in play, pending further proceedings in the courts. The injunction is not expected to impact the FinCEN extension, but if the court proceedings continue beyond the extended deadline, the CTA should not be enforceable unless additional rulings are made.
The court proceedings are moving forward, with the government requested to file a response by December 31, 2024, to a request for a rehearing en banc. The case is scheduled for oral arguments on March 25, 2025, with briefs due in February. The injunction remains in force, meaning that reporting companies are not currently required to file beneficial ownership information with FinCEN and are not liable for failing to do so. However, companies may continue to voluntarily submit reports if they choose to do so.
The Top Shop case is not the only one pending in the courts, with two other appeals relating to the CTA on the dockets of the United States Court of Appeals for the Fourth Circuit and the United States Court of Appeals for the Ninth Circuit. As the legal proceedings continue, the future of the BOI reporting requirements remains uncertain, with the courts considering the constitutional implications of the CTA. Further updates and developments are expected as the cases progress through the court system.
