FinCEN Alert – Update making BOI Optional

Preliminary Injunction GRANTED in Texas Top Cop Shop, Inc., et al. v. Garlan, et al., No. 4:24-cv-00478 (E.D. Texas).

On December 3, 2024, the District Court in the above-referenced case issued a preliminary injunction that makes effective the following:

1. Enjoins the Corporate Transparency Act (CTA), including enforcement of that statute and regulations implementing its beneficial ownership information reporting requirements; and
2. Stays all deadlines to comply with the CTA's reporting requirements.

In response to the preliminary injunction ordered on December 3, 2024, FinCEN, a bureau of the U.S. Department of the Treasury, issued a statement regarding the impact of the Texas preliminary injunction on the CTA's reporting requirements. Specifically, FinCEN states that it "will comply with that order", and states that the reporting companies are not required to file their beneficial ownership information ("the BOI Reports") with FinCEN, and that those companies will not be subject to liability if they fail to file their BOI Reports while the preliminary injunction remains in effect. FinCEN states that reporting companies may (continue to) voluntarily submit the BOI Reports.

It is important to know that the Department of Treasury is appealing the Texas order. Thus, while currently there is no requirement to file a BOI Report, this may change depending on the outcome of the appeal.

FinCEN acknowledges that there have been several cases that challenged the CTA that are currently pending before district courts around the country. FinCEN also points out that courts have upheld the CTA and denied other requests to enjoin the CTA, ruling in favor of the Department of Treasury. FinCEN further states that "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." ¹

It is important to note that some states, like New York, have introduced their own legislation based on the principles of the Corporate Transparency Act. The decision in Texas Top Cop Shop, Inc. v. Garland may not impact any state-level laws reporting requirements, which operate independently of federal rulings.

For more information and to stay updated on the status of the preliminary injunction, visit: https://fincen.gov/boi.

¹ https://fincen.gov/boi, Alert entitled “Impact of Ongoing Litigation – Deadline Stay – Voluntary Submission Only.”