On December 3, 2024, the US District Court for the Eastern District of Texas issued a preliminary injunction blocking the enforcement of the Corporate Transparency Act (CTA), which included, among other things, the requirement to file the Beneficial Ownership Information Report (BOIR). The Court also stayed the impending deadline (12/31/24) for filing the BOIR, if the entity had been formed prior to 2024.
We have been filing this report on behalf of our clients throughout 2024 and we were on pace to complete all of the required filings by the December 31, 2024 deadline, however with the issuance of the injunction, we have paused these filings until a final resolution is reached.
We could continue filing for our clients, however we do not believe, as a matter of principal, that we should be providing any government agency (Federal, state or local) more information than they are entitled to receive. We will keep you up to date on any further developments that would affect your filing requirements and please let us know if you have additional questions. Please read the section below, “Who Has Access to BOIR Information”, for more on how this information is going to be shared.
Possible Outcomes:
- Appeals court agrees with Texas District Court and injunction remains while case works its way through the courts. (Possible but would effectively kill the initiative as the case is not likely to be resolved in anything less than a year.)
- Appeals court disagrees with Texas District Court and limits the injunction to the parties in the case only. (Likely, only because allowing the injunction to remain in place nationwide would more or less kill the initiative due to the time it takes a case to make its way through the court system.)
- Appeals court refuses to hear case and injunction remains while case works it way through the courts. (Possible but Unlikely).
- CTA is repealed after change of Administrations (Likely sooner or later as this type of questionable reporting requirement is the kind of government activity that is being targeted by the Trump Administration in it’s effort to ‘shrink’ the government).
Background on BOIR
FinCEN, the agency within the Department of the Treasury tasked with enforcing this reporting regime, has stated that they will appeal the Court’s decision and will continue to accept BOIR reports from companies that wish to voluntarily submit their report. However, they also stated that they will not hold companies responsible for not filing by the December 31, 2024 deadline should they win their appeal. It is unknown how far out that FinCEN would extend the filing deadline, should the injunction be modified or removed, but it seems likely that the deadline would be extended until December 31, 2025, unless FinCEN would get on the appeals docket in short order.
Who Has Access to BOIR Information?
“FinCEN is the only agency with access to the BOIR information, correct?” That is incorrect. The list of potential recipients of this information may be one of the most staggering aspects of this government plan. Everyone was sold on the fact that this report was needed to battle money laundering and if you weren’t engaged in those activities it would be irrelevant that this information was collected. However, below is a list of ‘Authorized Recipients” of the information collected by FinCEN:
- Federal agencies engaged in national security, intelligence or law enforcement activity. Including criminal OR civil investigations.
- State, local and Tribal law enforcement agencies.
- Foreign Requesters – eg. law enforcement, prosecutors and judges from foreign countries.
- Financial Institutions
- Federal Regulators assessing financial institutions with which you may do business.
- Treasury Personnel.
NOTE: Federal, state, local and Tribal law enforcement will have direct access to the system! I cannot even imagine the nightmare this will create when an unethical individual with access to this system provides this confidential information to scammers. This system may open the floodgates to criminal activity rather than solve crimes.
Ongoing Court Battle
There have been several cases in 2024, which challenge the CTA as an unconstitutional overreach, while the Government argues the necessity to have these critical ‘tools’ to fight money laundering.
We find the argument that these filings will help fight money laundering to be a bit disingenuous, as most money laundering enterprises would either file these reports with incorrect or misleading information or just not file them at all.
It is estimated that there are millions of business owners that are unaware of the filing requirement, so it would be reasonable to say that there will be hundreds of thousands of companies that will not file these reports and there will be tens of millions of taxpayer dollars expended to ‘police’ the non-filers alone, much less take the data from these reports and use it to catch money launderers.
Just to give you an idea of the scope of this endeavor, there are an estimated 21.6 million LLC’s in the United States and an estimated 32.6 million businesses that are subject to this filing requirement. As of December 1st, FinCEN had received about 9.5 million BOIR’s, leaving four weeks for 23.6 million companies to file the report, prior to the injunction halting enforcement.
Relevant Cases to BOIR Enforcement:
Texas Top Cop Shop, Inc. vs. Garland, No. 4:24-CV-478 (E.D. Tex. 12/3/24)
Community Associations Institute v. Yellen, No. 1:24-cv-1597 (E.D. Va. 9/10/24)
Firestone v. Yellen, No. 3:2024cv01034 (D. Ore. 9/20/24)