BOI Reporting On Hold

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On December 3, 2024, a federal district court in Texas issued a nationwide preliminary injunction against enforcing the Corporate Transparency Act (CTA).   The court determined that the Act exceeds Congress’s authority and infringes upon states’ rights to regulate businesses, thus violating constitutional principles.

As a result, the injunction temporarily halts the January 1, 2025, deadline for businesses to file beneficial ownership information (BOI) reports with FinCEN.  While the ruling is likely to be appealed, businesses are not required to file BOI reports with FinCEN at this time.

The decision highlights significant concerns regarding the Act’s scope and its potential burdens on small businesses and states. Additional updates will follow as this legal matter progresses.

For context, the primary aim of CTA is to enhance transparency in corporate ownership by preventing illicit financial activities, combating money laundering, and ensuring the accountability of businesses operating in the United States. Though the CTA is focused on small entities, all Corporations, LLCs, LPs, LLPs, Business Trusts, and other entities formed or registered in the US are subject to comply with CTA, unless the entity is able to satisfy all of the following criteria to be considered a “large operating company”:

  • More than 20 full-time employees in the US
  • Operating within the US at a physical office owned or leased by the reporting entity and not shared except with affiliates; and
  • More than $5 million in gross receipts or sales, excluding gross receipts or sales from sources outside the US.

A US entity that is unable to satisfy all of the criteria above will be classified as a “reporting company”. Reporting companies that were in existence as of January 1, 2024, had until January 1, 2025, to file their initial report before the aforementioned injunction was issued. Companies formed in the 2024 calendar year had 90 calendar days after formation or registration to file the initial report before the injunction.

Please reach out to your attorney or DKC representative if you have any questions.

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