We are writing to provide an important update regarding the Corporate Transparency Act (the “CTA”) and its associated compliance requirements.
As a reminder, the CTA established a requirement for most business entities (referred to as “reporting companies”) that were in existence prior to January 1, 2024 to submit Beneficial Ownership Information Reports (“BOIR”), with a compliance deadline of January 1, 2025.
In our early updates we advised that the CTA has faced numerous legal challenges, including one case pending in the United States District Court for the Eastern District of Texas titled Texas Top Cop Shop, Inc., et al. v. Merrick Garland, Attorney General of the United States, et al. (the “Lawsuit”).
As of December 3, 2024, the Court in the Lawsuit issued an injunction that, for the time being, forbids the government’s enforcement of the CTA and its Reporting Rule, thereby putting on hold the compliance deadline (“Injunction”). According to the Court, pending further court action, reporting companies are not required to comply with the CTA’s January 1, 2025, filing deadline for BOIRs.
Please note the following key points:
- This matter is not yet resolved. The Lawsuit still is pending and, even if the plaintiffs were to win the Lawsuit, effectively making the Injunction permanent, the government retains procedural remedies (i.e., appeals) and may seek to overturn or modify the Injunction and/or final decision in the Lawsuit.
- The timing of the Injunction (i.e., so close in time to the January 1, 2025 filing deadline) is somewhat unfortunate because we do not know what will happen in the Lawsuit.
- If the Injunction is overturned, we do not know whether the original January 1, 2025 deadline will remain in place.
- We will continue to monitor the situation and will provide further updates if the status of the Injunction changes.
For clients with BOIR filings pending with us, we ask that you advise us on how you would like to proceed at this time. You may:
- Proceed with your BOIR filing: If you wish to move forward with your BOIR filing notwithstanding the Injunction, there is nothing that precludes you from doing so and we remain available to assist with your BOIR filing. This option also makes it irrelevant whether any further action is taken in the Lawsuit before the end of the year.
- Prepare your BOIR for filing, but hold: If you wish, we can continue to work with you to prepare your BOIR for filing, but then can hold off on the actual filing until we know more about any challenge to the Injunction and your resulting filing obligation. If you again become obligated to file your BOIR, BOIR filings that are ready for filing will receive priority attention.
- Hold further work on your BOIR filing: If you prefer to wait until the courts take further action with respect to the Injunction, we can pause further work on your BOIR filing process until we have additional guidance from the courts. Understand, however, that if the Injunction is overturned close to year-end and your BOIR filing is not ready for filing, we may not be available to complete each client’s filing prior to January 1, 2025. BOIR filings that are ready for filing will receive priority attention.
Please contact us at your earliest convenience with your preference or if you have any questions regarding this matter.
Thank you for your attention to this important update.