Stop me if you’ve heard this before: Beneficial Ownership Information (BOI) filing requirements are temporarily on hold.

In a ruling in late December, the government was (again) barred from enforcing BOI reporting requirements under the Corporate Transparency Act (CTA). A Dec. 26 order from the Fifth Circuit reversed an earlier decision granting a stay.

A stay is a court order that stops legal proceedings – it is usually temporary.

Here’s what happened.

Last minute scramble

In an order dated December 23, 2024, a panel of judges of the Fifth Circuit unanimously granted the government’s emergency motion to stay a preliminary injunction pending an appeal. Earlier this week, a judge in Texas ruled that a nationwide injunction barring the Financial Crimes Enforcement Network (FinCEN) from enforcing the CTA will stand.

The reversal originally meant that companies required to file BOI reports must file them while the government’s appeal goes through the court process, unless they are otherwise exempt.

Urgent request

The ruling was in response to an emergency petition the government filed with the U.S. Court of Appeals for the Fifth Circuit requesting an immediate stay. Noting that the filed injunction barring FinCEN from enforcing the CTA was nationwide, the government wrote: “The balance of harm is clearly in the government’s favor, and any injunction should in any event have been limited to the handful of companies , who have identified themselves before the district court.”

In a Dec. 23 ruling, a Fifth Circuit panel of judges unanimously granted the government’s emergency motion for a stay pending an appeal.

In the opinion, District Judges Stewart, Haynes and Higginson criticized the district court’s ruling, writing, “Regardless, the government has put in a strong performance against the companies’ de facto challenge to the CTA.” That is, the court wrote, “Here’s the case “The CTA is at least constitutional in requiring companies that engage in business activities affecting interstate commerce to disclose their beneficial ownership and applicant information to (FinCEN)” before it passes came to the conclusion: “Therefore the law is probably constitutional.” at first glance.

The panel was unsympathetic to fears of a last-minute scramble, writing: “The companies warn that lifting the district court’s injunction just days before the compliance deadline would place an undue burden on them. “What they’re missing is that they merely filed a motion.” The lawsuit was filed in May 2024, and the district court’s injunction has only been in effect for less than three weeks, compared to the nearly four years the companies have been since the law was passed CTA required to be prepared by Congress and the year since FinCEN announced the reporting deadline.”

You can read the December 23rd order here.

FinCEN Response to the Fifth Circuit

In response, FinCEN posted a message on its website just before the Christmas holiday extending the reporting deadline.

Under current law, a reporting company incorporated or registered to do business before January 1, 2024 has until January 1, 2025 to file its first report. This applies even if the company was founded years before 2024. This deadline has been extended to January 13, 2025.

A reporting entity incorporated or registered on or after January 1, 2024 and before January 1, 2025 has 90 calendar days from receipt of notice of entity formation or registration to file its first report. However, under the relief granted by FinCEN, reporting companies incorporated or registered on or after September 4, 2024 and whose filing deadline is between December 3, 2024 and December 23, 2024 now have until January 13, 2025 to submit their documents. Additionally, reporting companies incorporated or registered on or after December 3, 2024 and on or before December 23, 2024 will have an additional 21 days to file.

Reporting businesses that qualify for disaster assistance may be subject to extended deadlines beyond January 13, 2025. According to FinCEN, these companies should meet the later deadline.

(For more information on reporting requirements, see this previous article.)

FinCEN also confirmed that the plaintiffs in National Small Business United v. Yellen– Isaac Winkles, reporting entities 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 submit their beneficial ownership information to FinCEN report at this time.

Surprising verdict

On December 26, the Fifth Circuit issued an order again suspending the preliminary injunction. The court noted the government’s appeal and the December 23 ruling and stated that the appeal has been referred to the next available panel for hearing.

(Remember that a preliminary injunction—and any decision related to the preliminary injunction—does not constitute a final resolution of a case.)

However, the court wrote, “In order to preserve the constitutional status quo while the expert panel considers the parties’ substantial substantive arguments, the portion of the motion panel’s decision granting the government’s motion to stay the district court’s preliminary injunction must be included.” the enforcement is ordered, CTA will be made and the reporting rule will be DELETED.”

(Vacate is a legal term meaning the reversal of a previous judgment or order.)

This means that the part of the judgment that overturned the injunction has been struck out – meaning the injunction is now back in effect.

You can read the unpublished order here.

Reactions

The order surprised many – including me. Reactions on social media ranged from disbelief to relief to anger.

Molly Day, vice president of public affairs for the National Small Business Association, said in a statement to Forbes, “Any delay on this unconstitutional rule is a good thing.”

She continued: “Although the Fifth Circuit’s initial lifting of the injunction cites the fact that small businesses have had months to prepare for the rule, this is given the hectic nature of the arguments on Capitol Hill and in the NSBA lawsuit and.” Those that followed ours did not.” I am surprised that there is a lot of confusion about when the BOI reports are due. We welcome this latest delay and urge the courts – and legislatures – to provide a measure of certainty, extend a longer-term delay, and ultimately repeal or repeal this law.”

prehistory

In Texas Top Cop Shop, Inc., et al. v. Garland et al.Judge Amos Mazzant, an Obama appointee, granted the National Federation of Independent Business (NFIB)’s request for a preliminary injunction blocking the U.S. Treasury Department from enforcing the CTA’s reporting requirements. Because the NFIB and its nearly 300,000 members were involved in this case, the judge blocked nationwide enforcement of BOI reporting requirements.

On December 17, 2024, Mazzant ruled that a nationwide injunction prohibiting FinCEN from enforcing the Corporate Transparency Act (CTA) remains in place. Mazzant had previously granted the plaintiffs’ request for a preliminary injunction, blocking the U.S. Treasury Department from enforcing the CTA’s reporting requirements.

This injunction was appealed to the Fifth Circuit, resulting in a flurry of legal action.

Latest action

The latest action should mean that the injunction is back in effect – the district court’s original injunction prohibiting FinCEN from enforcing the BOI reporting requirements remains in effect.

The injunction should have no impact on the FinCEN expansion. However, if the Fifth Circuit’s litigation continues beyond the January 13, 2025 deadline (or other deadlines), the CTA is unlikely to be enforceable, pending further rulings.

Court cases continue to flow through the system. In response to a request for a sample en banc, The court asked the government to file a response by December 31, 2024 at 12:00 p.m. It could be a rocky end to the year.

(On the bench is French – surprisingly not Latin! – for on the bench. This means that all judges in a particular court hear a case. This happens when a matter is particularly complex or important.)

A request to FinCEN for comment on next steps outside of business hours was not immediately returned.

Other court rulings

The Top shop The case is not the only case pending in court. In addition to National Small Business United v. Yellen As noted 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 appeals of CTA cases on their dockets.

(Note: Updated to reflect a statement from the NSBA and additional details on next steps.)

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