BOI reporting gets Injunction by Texas judge - Took them long enough!

[BulldogTom]

December 3, 2024

Press Release
NFIB’s lawsuit challenged the Corporate Transparency Act and beneficial ownership reporting requirements
WASHINGTON, D.C. (Dec. 3, 2024) – The National Federation of Independent Business (NFIB) applauds today’s decision in the case Texas Top Cop Shop, Inc., et al. v. Garland, et al. at the U.S. District Court for the Eastern District of Texas. The Court granted NFIB’s request for a preliminary injunction, blocking the U.S. Department of Treasury from enforcing the Corporate Transparency Act’s (CTA) beneficial ownership information (BOI) reporting requirements.

“This ruling is a huge victory for small businesses nationwide, and just in time” said Beth Milito, Executive Director of NFIB’s Small Business Legal Center. “For many Main Street small businesses, they were a mere four weeks away from the deadline to file their information in accordance with the CTA. The BOI reporting requirements are a harmful invasion of small business owners’ privacy and a misuse of their valuable time. Thankfully, the Court agreed and granted a preliminary injunction, giving small business owners a reprieve from this burdensome rule.”

NFIB’s lawsuit argues that the CTA is unconstitutional in that it exceeds Congress’s authority over the states, improperly compels speech and contradicts the right of anonymous association guaranteed by the First Amendment, and violates the Fourth Amendment by forcing the disclosure of private information. NFIB partnered with The Center for Individual Rights (CIR) and filed the lawsuit with the Texas Top Cop Shop, Data Comm for Business, Mustardseed Livestock, Russell Straayer, and Libertarian Party of Mississippi. Because NFIB and its nearly 300,000 members were a party to this case, the judge blocked enforcement of the BOI reporting requirements nationwide. This reaffirms the power that NFIB members hold when they stand up and speak out in protection of their rights.

The NFIB Small Business Legal Center protects the rights of small business owners in the nation’s courts. NFIB is currently active in more than 40 cases in federal and state courts across the country and in the U.S. Supreme Court.

Tom
Longview, TX

[Lee B]

Bloomberg Law:

"We note this is a preliminary injunction, and we urge reporting companies to pay attention for additional updates and proceedings in this

and other cases which could modify or change this order." 

Good, I can put this on the back burner

[JimTaxes]

Is this preliminary injunction still just for NFIB members/parties?

[BulldogTom]

4 hours ago, JimTaxes said:

Is this preliminary injunction still just for NFIB members/parties?

Supposed to be nationwide.   However, very confusing since the judge in Alabama said he couldn't expand to everyone and this Texas judge says he can.   They are both in the same federal circuit (5th?) so very different rulings.    

I expect Fincen to come out with a statement that they are appealing and that they expect taxpayers to comply with their rules during the legal process.

Tom
Longview, TX

[Lee B]

10 hours ago, JimTaxes said:

Is this preliminary injunction still just for NFIB members/parties?

Excerpt from the legal firm KUTAKROCK:

"Note that the court’s injunction is nationwide and is not limited to the plaintiffs in the case. By contrast, on March 1, 2024, the Federal District Court for the Northern District of Alabama entered an order declaring the CTA unconstitutional and permanently enjoining the government from enforcing the CTA against only the named plaintiffs in that case1. "

[JohnH]

Like Tom, I wonder how FinCEN is going to handle this. If you're on their notification list you know that they did send an email this afternoon, but it was a puff piece about nominations to the Bank Secrecy Act Advisory Group. Not that this wasn't important, but the communication failed to address the main thing that's on everyone's mind.  I took a peek at their news site and there was no mention of this court case there either.  

[DANRVAN]

From AICPA:

An AICPA statement acknowledged the potential effects of the injunction and urged CPAs assisting clients with BOI reporting to be prepared.
 
“Under the injunction, FinCEN is barred from enforcing BOI filing requirements while the case is pending,” the statement said. “Best practices dictate that at a minimum those assisting clients with BOI report filings gather the required information from the clients and are prepared to file the BOI report if the injunction is lifted. While it is unlikely that the injunction will be lifted prior to the final outcome of the proceedings, we advise being prepared in the event that there is a reversal.”

[Medlin Software, Dennis]

A legal firm I trust posted (paraphrasing), those that have not filed, need not. If ever enforced, there will likely be a reasonable time to comply. Those that have already submitted, can do nothing, or consider trying to remove any data they deem sensitive. They mentioned the injunction was worded that it is likely the plaintiffs will prevail, but one must be prepared just in case.

Logically, not that it applies, it may end up where the states will have to compel more data for company registration. To me, the principle is good, ability to know who is responsible. The flaw is the feds appear to be overstepping.

I have privacy concerns, but there are very legal means to comply without giving away one's home address.

[Abby Normal]

On December 3, 2024, in deciding the case Texas Top Cop Shop, Inc., et al. v. Garland, et al., the U.S. District Court for the Eastern District of Texas found the Corporate Transparency Act (CTA) to be unconstitutional. The Court granted a nationwide preliminary injunction against the U.S. Department of Treasury Financial Crimes Enforcement Network (FinCEN), at least temporarily blocking it from enforcing the provisions of the CTA, which requires certain businesses to report beneficial ownership information (BOI) to FinCEN.

This is potentially good news for many businesses, as the January 1, 2025, deadline to file initial BOI reports with FinCEN was quickly approaching.

However, on December 4, 2024, FinCEN issued the following statement:

The Corporate Transparency Act (CTA) plays a vital role in protecting the U.S. financial system, as well as people across the country, from illicit finance threats like terrorist financing, drug trafficking, and money laundering.  We continue to believe—consistent with the conclusions of other federal courts—that the CTA is constitutional. Yesterday’s ruling is one of several cases pending before courts around the country, including ones in which district courts have denied requests to enjoin the CTA and that are now before courts of appeals. We are reviewing the ruling to determine our next steps. We would refer you to DOJ for any further information about the case.

We believe that in light of the preliminary injunction, filing a BOI report now is technically not required, but we expect that the injunction will eventually be lifted and that filing will, at some point, be required. As FinCEN determines whether it will appeal the Court’s ruling in this case (and we wait to see if an appellate court will review the Court’s decision prior to the January 1, 2025 initial reporting deadline), we are advising our clients that are not eligible for an exemption under the CTA to delay submitting their BOI to FinCEN at this time but to continue to gather their BOI in order to be in a position to submit their BOI by January 1, 2025, in the event the ruling is overturned or stayed.

We will keep a close eye on this decision as it works its way through the judicial system and update you immediately if our guidance changes.

https://www.jdsupra.com/legalnews/important-update-temporary-halt-on-7521695/

[Abby Normal]

https://www.journalofaccountancy.com/news/2024/dec/nationwide-injunction-halts-boi-reporting-for-now.html

"The AICPA understands the confusion and anxiety that business owners have struggled with regarding the BOI reporting requirement. We believe that the injunction … is applicable nationwide to all small businesses. While we are still awaiting formal guidance from FinCEN, if this injunction is applicable as we believe, many small businesses would receive the much-needed BOI reporting relief. The AICPA will continue an open dialogue with FinCEN in the hopes that our questions and concerns will be addressed, and we will continue to advocate on behalf of small businesses for clarity and relief."

[Catherine]

On 12/4/2024 at 3:13 PM, Lee B said:

March 1, 2024, the Federal District Court for the Northern District of Alabama entered an order declaring the CTA unconstitutional

If it's unconstitutional, that is by its very essence national and universal within the nation, the Constitution still being the "Supreme Law of the Land,"  "and the judges in every State shall be bound thereby" (Article VI, 2nd paragraph).

[Lee B]

13 hours ago, Catherine said:

If it's unconstitutional, that is by its very essence national and universal within the nation, the Constitution still being the "Supreme Law of the Land,"  "and the judges in every State shall be bound thereby" (Article VI, 2nd paragraph).

This application of this ruling was limited to the plaintiffs in this case.