The U.S. Court of Appeals for the Fifth Circuit on Dec. 26 reinstated a nationwide injunction halting enforcement of beneficial ownership information (BOI) reporting requirements, reversing an order issued earlier in the week by a lower court.
The BOI reporting requirements are imposed by the Corporate Transparency Act (CTA), an anti-money laundering statute passed in 2021 that is enforced by the Financial Crimes Enforcement Network (FinCEN), a bureau within the U.S. Department of the Treasury.
Under the CTA, reporting companies must disclose the identity of and information about beneficial owners of the entities. For new entities incorporated after Jan. 1, 2024, reporting companies must also disclose the identity of “applicants” — defined as any individual who files an application to form a corporation, limited liability company, or other similar entity.
On Dec. 3, a federal district court in Texas issued an injunction in Texas Top Cop Shop, Inc. v. Garland stating that the CTA and the BOI reporting rule could not be enforced and that reporting companies would not have to comply with the Jan. 1, 2025, BOI reporting deadline pending a further order of the court.
The U.S. Department of Justice (DOJ) appealed the injunction to the Fifth Circuit. On Dec. 23, a panel of the Fifth Circuit granted the DOJ motion to lift the injunction, but then on Dec. 26 a different panel of judges with the same court then reversed that order.
The Fifth Circuit Court of Appeals said in its Dec. 26 ruling that it was reinstating the lower court’s injunction “in order to preserve the constitutional status quo while the merits panel considers the parties’ weighty substantive arguments,” referring to the panel of judges who will decide the appeal.
On Dec. 27, FinCEN issued an updated alert on its BOI information page, saying that companies can voluntarily submit BOI reports.
“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,” according to the FinCEN alert. “However, reporting companies may continue to voluntarily submit beneficial ownership information reports.”
The Association of International Certified Professional Accountants (AICPA), which has been urging the government to postpone the original Jan. 1, 2025, BOI reporting deadline, said in a statement Friday that it “is seeking guidance from FinCEN and maintains its advice for those assisting clients with BOI filings to gather information required from clients and be prepared to file in case the injunction is lifted again.”