Beneficial Ownership Information Report – Yes, You Need To Do This . . . Voluntarily? (December 13, 2024)

Beneficial Ownership Information Report – Yes, You Need To Do This . . . Voluntarily? (December 13, 2024)

December 13, 2024

To our Clients and Friends:

Beneficial Ownership Information Report – Yes, You Need To Do This . . . Voluntarily?

So, this happened:

Alert: Impact of Ongoing Litigation – Deadline Stay – Voluntary Submission Only https://fincen.gov/boi :

“While this litigation is ongoing, FinCEN will comply with the order issued by the U.S. District Court for the Eastern District of Texas for as long as it remains in effect. Therefore, reporting companies are not currently required to file their beneficial ownership information with FinCEN and will not be subject to liability if they fail to do so while the preliminary injunction remains in effect. Nevertheless, reporting companies may continue to voluntarily submit beneficial ownership information reports.”

On December 3, 2024, U.S. District Judge Amos Mazzant of the Eastern District of Texas put in question the constitutionality of the Corporate Transparency Act and the related and the FinCEN BOI Reporting Rule by issuing a preliminary injunction that:

• enjoins the CTA, 31 U.S.C. § 5336;
• enjoins enforcement of the BOI Reporting Rule, 31 C.F.R. § 1010.380;
• stays the January 1, 2025 compliance deadline imposed by the BOI Reporting Rule;
• orders that “[n]either [the CTA nor the BOI Reporting Rule] may be enforced”; and
• declares that “reporting companies need not comply with the CTA’s January 1, 2025, BOI reporting deadline pending further order of the Court.[1]

The difference between this case and the other BOI Reporting Rule case where a preliminary injunction was issued[2] is that Judge Mazzant’s order not only applies to the parties in the case before him but would apply nationwide. Because one of the Plaintiffs’ operations extended across the country, Judge Mazzant held that the extent of the constitutional violation alleged was best served through a nationwide preliminary injunction.

This is not the final say so on the status of the BOI Reporting Rule.  This court will have a hearing and issue an opinion on whether or not the BOI Reporting Rules are constitutional or not, and that opinion will be appealed and added to the opinions that have determined that it is constitutional, and all of the cases may be are heading to the US Supreme Court if the Department of Justice continues to determine to pursue the matter.

So, you good?

Not quite.

If you are an LLC formed in New York or Massachusetts, or a business entity organized in the District of Columbia,  you still have a state level BOI reporting requirement.  Similar requirements in California and Maryland recently failed to pass the state legislatures but are expected to be revived in the next legislative secessions.

Oh, and the preliminary injunction issued by Judge Mazzant could be stayed by the appellate court, in which case the BOI Reporting Requirement would no longer be voluntary.

We will continue to monitor this situation and provide additional updates as the situation warrants.

For further information or any questions on this issue, please contact Marvin Miller (miller@cmxlaw.com), Head of our Finance and Banking Practice Group.

Crath Miller & Xistris LLP

Offices: New York

[1] Texas Top Cop Shop, Inc. v. Garland, No. 4:24-cv-00478 (E.D. Tex.), at *79 (Dec. 3, 2024).

[2] National Small Business United v. Yellen, No. 5:22-cv-01448 (N.D. Ala.) (Mar. 4, 2024; updated March 11, 2024), where FinCEN was prevented from enforcing the Corporate Transparency Act against the plaintiffs in that action but no other parties.

For further information, please contact us at info@cmxlaw.com.

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