Advocacy Alert: BOI injunction back in effect after Fifth Circuit vacates stay

By FICPA Governmental Affairs

The injunction suspending beneficial ownership information (BOI) reporting is back in effect, after a Fifth Circuit Court of Appeals panel on Thursday vacated a stay issued just days prior.

In response, the Financial Crimes Enforcement Network (FinCEN) has once again announced that "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."

This is the same announcement FinCEN made on Dec. 7, following a ruling by U.S. District Court judge in Texas who deemed the Corporate Transparency Act (CTA) to be unconstitutional and who granted a nationwide injunction against its enforcement.

Earlier this week, on Monday, Dec. 23, the Fifth Circuit granted a Department of Justice motion for a stay of the injunction, prompting FinCEN to issue a series of short filing extensions for companies with BOI reporting obligations.

But on Thursday, a different Fifth Circuit panel vacated the stay, reinstating the injunction.

The AICPA, FICPA and other state societies have consistently called for BOI reporting postponements until the court cases surrounding the CTA have been resolved.

We likewise continue to advise our members and all those with BOI filing obligations to be prepared to file in the event the injunction is once again lifted.

You can find FinCEN's full announcement and its recap of the ongoing litigation below.

FinCEN Alert: Impact of Ongoing Litigation – Deadline Stay – Voluntary Submission Only

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.

The Corporate Transparency Act (CTA) plays a vital role in protecting the U.S. and international financial systems, as well as people across the country, from illicit finance threats like terrorist financing, drug trafficking, and money laundering. The CTA levels the playing field for tens of millions of law-abiding small businesses across the United States and makes it harder for bad actors to exploit loopholes in order to gain an unfair advantage.

On Tuesday, December 3, 2024, in the case of Texas Top Cop Shop, Inc., et al. v. Garland, et al., No. 4:24-cv-00478 (E.D. Tex.), the U.S. District Court for the Eastern District of Texas, Sherman Division, issued an order granting a nationwide preliminary injunction. Texas Top Cop Shop is only one of several cases that have challenged the Corporate Transparency Act (CTA) pending before courts around the country. Several district courts have denied requests to enjoin the CTA, ruling in favor of the Department of the Treasury. The government continues to believe—consistent with the conclusions of the U.S. District Courts for the Eastern District of Virginia and the District of Oregon—that the CTA is constitutional. For that reason, the Department of Justice, on behalf of the Department of the Treasury, filed a Notice of Appeal on December 5, 2024 and separately sought of stay of the injunction pending that appeal.

On December 23, 2024, a panel of the U.S. Court of Appeals for the Fifth Circuit granted a stay of the district court’s preliminary injunction entered in the case of Texas Top Cop Shop, Inc. v. Garland, pending the outcome of the Department of the Treasury’s ongoing appeal of the district court’s order. FinCEN immediately issued an alert notifying the public of this ruling, and recognizing that reporting companies may have needed additional time to comply with beneficial ownership reporting requirements, FinCEN extended reporting deadlines. On December 26, 2024, however, a different panel of the U.S. Court of Appeals for the Fifth Circuit issued an order vacating the Court’s December 23, 2024 order granting a stay of the preliminary injunction. Accordingly, as of December 26, 2024, the injunction issued by the district court in Texas Top Cop Shop, Inc. v. Garland is in effect and reporting companies are not currently required to file beneficial ownership information with FinCEN.