On January 23, 2025, the U.S. Supreme Court lifted the initial injunction preventing enforcement of Corporate Transparency Act (CTA) in Texas Top Cop Shop, Inc. v. Garland (E.D. Tex.). However, FinCEN continues to make the Beneficial Ownership Information reporting (BOI Report) requirement voluntary.
Our position regarding the filing of BOI Reports remains unchanged. We believe clients should only file a voluntary BOI Report if they are not concerned about disclosing the information. Once disclosure is made, it is irretrievable.
Why the CTA Requirement to File a BOI Report Remains Voluntary
While FinCEN has aggressively defended the CTA, it is interesting the department is taking the position that BOI Reports are not required in its recent statement:
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.
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On Jan. 23, the Supreme Court granted the government’s motion to stay a nationwide injunction issued by a federal judge in Texas (Texas Top Cop Shop, Inc. v. McHenry—formerly, Texas Top Cop Shop v. Garland). As a separate nationwide order issued by a different federal judge in Texas (Smith v. U.S. Department of the Treasury) still remains in place, reporting companies are not currently required to file beneficial ownership information with FinCEN despite the Supreme Court’s action in Texas Top Cop Shop. Reporting companies also are not subject to liability if they fail to file this information while the Smith order remains in force. However, reporting companies may continue to voluntarily submit beneficial ownership information reports.
What is Next and What is the Outlook?
The case remains before the 5th Circuit. Oral arguments are scheduled for March 25, 2025. It may take the 5th Circuit time to make a ruling.
The Texas Top Cop Shop lawsuit is one of several lawsuits challenging the validity and enforceability of the CTA and its reporting requirement. A separate January 7, 2025, injunction in the case Smith v. U.S. Department of Treasury remains in place. While this injunction only prevents CTA enforcement against the parties in the case, it claims to stay the effective date of the BOI Reporting requirement more broadly.
Noteworthy is the Trump administration’s recent control of the Justice Department. The Justice Department has aggressively defended the CTA in the pending litigation. However, then-President Trump vetoed the National Defense Authorization Act for Fiscal Year 2021 (NDAA). The NDAA contained the CTA and its BOI Reporting requirement. The CTA was enacted because of a congressional override of President Trump’s veto.
The Justice Department’s defense of the CTA may drastically change now that President Trump is in office again. Although President Trump cannot ignore the CTA, which has become law, he and his administration are under no obligation to defend the CTA as vigorously as the Biden administration has. President Trump can aid the courts in ruling the CTA is unconstitutional and therefore unenforceable if the Justice Department fails to forcefully defend the act.
Skabelund PLLC will continue to monitor the pending CTA litigation and will update its clients regarding any changes to CTA enforcement.
