Category: FinCEN Updates

Washington, D.C. — The United States Supreme Court issued a crucial decision granting a stay on the nationwide injunction on the CTA on January 23rd, 2025. The decision, made in relation to case No. 4:24–cv–478 from the United States District Court for the Eastern District of Texas, halts the enforcement of the December 5th, 2024, nationwide injunction.

The application for the stay (24A653), initially presented to Justice Samuel Alito, was granted. The stay will remain in effect pending the outcome of an appeal in the United States Court of Appeals for the Fifth Circuit and the resolution of a potential petition for a writ of certiorari. Notably, Justice Jackson issued the lone dissenting opinion in the case.

This may sound like the CTA is fully enforceable again, placing all businesses that have not yet filed at potential legal risk pending further action, however, it is not this simple due to other existing court cases.

What Does It Mean for the CTA?

Although the Supreme Court’s ruling reinstates the enforcement of the CTA, obstacles remain that continue to prevent full implementation of its requirements. In early January another federal district judge in Texas in Smith v United States Department of The Treasury placed a nationwide stay on the effective date of the reporting rule not the law itself. What does this mean in general terms? The following is guidance straight from FinCEN’s website:

“In light of a recent federal court order, reporting companies are not currently required to file beneficial ownership information with FinCEN and are not subject to liability if they fail to do so while the order remains in force. However, reporting companies may continue to voluntarily submit beneficial ownership information reports.”

Beneficial Ownership Information reports are still currently voluntary despite the Supreme Court’s recent stay.

What’s Next?

While FinCEN has not yet appealed the decision in the Smith case, they are likely to do so. If the appeal is successful and the stay is lifted, the CTA and its reporting requirements could resume in full force. It is important to closely monitor developments in this case, as the removal of the stay may require businesses to file quickly to avoid steep penalties.

The Fifth Circuit Court of Appeals will hear oral arguments in Texas Top Cop Shop, Inc. v. Garland regarding the constitutionality of the CTA, starting March 25, 2025.

UPDATE – January 3rd: The U.S. Supreme Court has engaged with DOJ’s request to stay the injunction against the Corporate Transparency Act.

Justice Alito has established a 4 p.m. deadline on January 10, 2025, for the plaintiffs in Texas Top Cop Shop to respond to the Department of Justice’s motion for a stay. This timeline suggests the Supreme Court is moving quickly to decide whether to reinstate BOI reporting requirements by suspending the preliminary injunction currently blocking enforcement of the Corporate Transparency Act (CTA). 

Late on New Year’s Eve, the U.S. Solicitor General on behalf of FinCEN filed an emergency application for a “Stay” on the injunction issued by the District Court in the Texas Top Cop Shop v. Garland case.

This means that at any time, the U.S. Supreme Court could choose to overturn the current injunction that makes Beneficial Ownership Information Reporting (BOIR) filing voluntary. If this occurs, similar to the roller-coaster that occurred on December 23^rd when the Fifth Circuit Court of Appeals put a stay on the injunction  – the BOIR could once again become mandatory, with an imminent due date for entities formed prior to 2024 (although FinCEN would likely provide a short filing extension to at least January 13^th in that eventuality).

Given all of this uncertainly, the two primary paths forward continue to be as follows:

• Prepare to file your BOIR at a moment’s notice – pending further legal resolution of this high-stakes filing requirement, with the legal system poised to reinstitute the filing requirement at any time.
• File your BOIR voluntarily – ensuring compliance now avoids the crazy roller-coaster with seemingly constant legal developments, combined with last-minute filing stress and possible civil and criminal penalty exposure for missing a filing window.

Ultimately, this reporting requirement is high-stakes, with onerous penalties that include civil fines of up to $591 per day, and criminal fines of up to $10,000 per report paired with up to two years of imprisonment. As such, if you choose to wait to file your BOIR, it is imperative that you monitor this legal battle for future daily developments, and are positioned to file at a moment’s notice.

In an unexpected development, the merits panel of the Fifth Circuit Appeals Court on December 26^th essentially reinstated a nationwide injunction for Corporate Transparency Act (CTA) Beneficial Ownership Information Reporting (BOIR). This marked a sharp reversal from just three days earlier, when the court had granted the Government’s motion to “stay” the preliminary injunction and reinstated filing requirements.

This means that for all businesses nationwide, the crucial requirements to file BOIR have once again been temporarily suspended. The recently adjusted deadline of January 13, 2025 that applies to most businesses is essentially “paused” and no longer relevant as this legal battle continues.

The court explained its decision as necessary “to preserve the constitutional status quo while the merits panel considers the parties’ weighty substantive arguments”. The court also expedited the appeal to the “next available oral argument panel”, which it appears could be the week of January 6^th based upon the court’s published schedule.

Given the rapid-fire recent legal developments around this reporting, further changes are highly possible. The status of the injunction or additional delays could shift again as courts continue to address the constitutional challenges to the CTA.

So where do you go from here? The two primary paths forward are as follows:

• Prepare to file your BOIR at a moment’s notice – pending further legal resolution of this high-stakes filing requirement.
• File your BOIR voluntarily – ensuring compliance now avoids last-minute filing stress and possible civil and criminal penalty exposure if the requirement is ultimately upheld and you miss the filing window.

Ultimately, this reporting requirement is high-stakes, with onerous penalties that include civil fines of up to $591 per day, criminal fines of up to $10,000 per report, and up to two years of imprisonment. As such, if you choose to wait to file your BOIR, it is imperative that you monitor this legal battle for future daily developments. For a full copy of the most recent court decision – see this LINK.

Secure Compliance provides advanced technology solutions for professionals and businesses filing BOIR with FinCEN. We seek to make gathering information and filing the BOIR as painless and hassle-free as possible.

Pending continued legal developments on the status of the required Beneficial Ownership Information Reporting (BOIR), we recommend that you remain fully prepared for compliance.

Key steps to consider as part of preparation to file your BOIR include the following:

Obtain FinCEN IDs for Key Owners

If you haven’t already obtained FinCEN IDs for key beneficial owners, especially those that hold multiple entities, you may want to consider expediting obtaining these IDs. Obtaining a FinCEN ID can streamline reporting and also increase privacy for owners.

Engagement Management

For professionals and advisors, it is imperative to have a well-defined engagement letter or other contract with your client that clearly defines the scope of your work and your responsibilities.

Obtain and Document Key Entity Information

The designation of a “Beneficial Owner” includes both persons with direct or indirect ownership or control of more than 25% of an entity, or certain other persons with substantial control over the entity. Prior to filing, you should have a complete file documenting ownership and control persons of the business, including organization charts, governing legal documents, and ownership tables.

Account for Key Complexities

Make sure to account for additional key complexities when filing your BOIR, including:

• • Community property rules
  • Tiered ownership structures
  • Complex ownership structures (complex capital structures, waterfall equity calculations, etc.)
  • Series LLCs
  • Trusts
  • Ownership or control persons that are unresponsive to data requests
  • General durable power of attorney

Obtain Beneficial Owner Information

Included with each report will be either the FinCEN ID number for each Beneficial Owner, or the following information:

• • • Full legal name
    • Date of Birth
    • Residential Address
    • A unique identifying number from an acceptable identification document (e.g. passport, driver’s license)
    • An image of the identification document

File Your BOIR

You have two primary options for filing a FinCEN Beneficial Ownership Information Report:

1. 1. 1. 1. File directly with FinCEN
         2. File with a third-party software provider like Secure Compliance. Benefits can include:
            • Secure data retention pending resolution of the BOIR legal battles
            • Automated data collection
            • Data entry speed and ability to link single owners across multiple entities
            • Streamlined bulk uploads
            • Expert support

Monitor for Developments

Additional developments are expected in the weeks to come, including FinCEN guidance and possibly changes to the law by a new Congress next year.