Boutin Jones Inc.

01/28/2025 | News release | Distributed by Public on 01/28/2025 17:23

The Corporate Transparency Act – The Saga Continues

When we last looked in on the ongoing saga of the Corporate Transparency Act (CTA) and its Beneficial Ownership Information (BOI) reporting requirement enforced by the Financial Crimes Enforcement Network (FinCEN), this Tax Blog described the following developments:

  • On December 3, 2024, in the case of Texas Top Cop Shop v. Garland et al., the U.S. District Court for the Eastern District of Texas granted the plaintiffs' motion for a universal injunction prohibiting the enforcement of the BOI reporting requirement, which put the reporting requirement on hold pending appeal of the injunction.
  • The defendants filed a motion with the Fifth Circuit Court of Appeals seeking a stay of the injunction. On December 23, this motion was granted by a motions panel of the Fifth Circuit Court of Appeals. The BOI reporting requirement was back on.
  • On December 26, a merits panel for the Fifth Circuit vacated the stay of the injunction granted earlier by the Fifth Circuit motions panel. The BOI reporting requirement was once again enjoined.
  • On December 31 the defendants filed an application with the U.S. Supreme Court requesting a stay of the Texas district court's injunction.

Last week we saw more action on the CTA front:

  • On January 23, 2025, the U.S. Supreme Court granted the defendants' request for a stay of the injunction. It appeared that the BOI reporting requirement was back on. The Court's docket for January 23 had the following:

Application (24A653) for stay presented to Justice Alito and by him referred to the Court is granted. The December 5, 2024 amended order of the United States District Court for the Eastern District of Texas, case No. 4:24-cv-478, is stayed pending the disposition of the appeal in the United States Court of Appeals for the Fifth Circuit and disposition of a petition for a writ of certiorari, if such a writ is timely sought. Should certiorari be denied, this stay shall terminate automatically. In the event certiorari is granted, the stay shall terminate upon the sending down of the judgment of this Court. Justice Gorsuch concurring in the grant of stay. (Detached Opinion). Justice Jackson dissenting in the grant of stay. (Detached Opinion)

But wait, hold the phone. Although the Supreme's Court's stay affected the injunction from the Texas Top Cop Shop case, there was another case in the Eastern District of Texas, Samantha Smith v. U.S. Dept. of Treasury, which had also granted a preliminary injunction prohibiting enforcement of the BOI reporting requirement. And so:

  • On January 24, the following alert appeared on FinCEN's website saying that the reporting requirement was still enjoined:

On January 23, 2025, the Supreme Court granted the government's motion to stay a nationwide injunction issued by a federal judge in Texas (Texas Top Cop Shop, Inc. v. McHenry-formerly, Texas Top Cop Shop v. Garland). As a separate nationwide order issued by a different federal judge in Texas (Smith v. U.S. Department of the Treasury) still remains in place, reporting companies are not currently required to file beneficial ownership information with FinCEN despite the Supreme Court's action in Texas Top Cop Shop. Reporting companies also are not subject to liability if they fail to file this information while the Smith order remains in force. However, reporting companies may continue to voluntarily submit beneficial ownership information reports.

While the CTA saga has been playing out, some seismic shifts have occurred with the incoming Trump administration. It seems clear that the Supreme Court would probably grant another request for a stay to the current injunction by the Smith case. However, some speculate that holding off on requesting a stay may be a way for the new administration to signal its intent not to defend the law and its constitutionality.

Meanwhile, on the legislative front, bills in the House and Senate were introduced on January 15 to do away with the law entirely. The "Repealing Big Brother Overreach Act" (S. 100), introduced by Senator Tommy Tuberville (R-AL), is backed by 25 other Senate Republicans. Representative Warren Davidson (R-OH) introduced a companion bill (H.R. 425), which has 83 Republican co-sponsors.

Bottom Line: As of the date of this Tax Blog post, the BOI reporting requirement is not in effect. We await further developments. In the meantime, reporting companies and their professional advisors should be aware of the BOI reporting requirement, and should be ready to comply if the reporting requirement goes back into effect.