Details
On December 3, 2024, the U.S. District Court for the Eastern District of Texas, issued a nationwide preliminary injunction that temporarily enjoins the federal government from enforcing the beneficial ownership information reporting requirements under the Corporate Transparency Act (the “CTA”).
As this is a nationwide injunction, it impacts the registration deadlines for “reporting companies” in Hawaiʻi as well.
The federal district court in Texas Top Cop Shop, Inc. et al. v. Garland et al., No. 4:24-cv-478 (E.D. Tex.; Dec. 3, 2024), opined that CTA is likely unconstitutional and exceeds Congress’ power. This ruling only resulted in the issuance of a preliminary injunction and further court proceedings are required to permanently enjoin the CTA registration requirements. In addition, possible appeals by the U.S. Department of Justice may affect the ultimate decision.
Next Steps
For the moment, “reporting companies” are not required to file beneficial ownership information (“BOI”) reports under the CTA. On December 6, FinCEN released the following notice on their website: “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.”
Cades Schutte will continue to monitor the developments in these proceedings and how they may impact the beneficial ownership reporting deadlines, including the January 1, 2025, deadline for “reporting companies” formed prior to January 1, 2024. If you have any questions about the CTA and/or the BOI reports, please contact one of our Corporate Attorneys.
In view of the current status of the proceedings, we recommend that “reporting companies” (a) continue to monitor this case and the ruling as it moves through the judicial/appeal process; and (b) continue to gather the information required to complete and file the BOI reports. This approach will enable “reporting companies,” who have not already submitted their BOI reports with FinCEN, to be prepared to timely submit their BOI reports if the preliminary injunction is lifted or modified, and enforcement resumes.
