In a surprising turn of events, a Texas court has issued a nationwide injunction that temporarily suspends the enforcement of the Corporate Transparency Act (CTA). This means that many small businesses are no longer required to comply with the CTA’s beneficial ownership information (BOI) reporting requirements—at least for the time being. This is particularly relevant for Ohio residents, who are now not required to comply with this enforcement for the 2024 tax year.
What is the Corporate Transparency Act?
The CTA, passed in 2021, aims to crack down on money laundering and other illicit activities by requiring certain businesses to disclose their true owners to the Financial Crimes Enforcement Network (FinCEN). The goal is to prevent criminals from hiding behind shell companies.
What did the court rule?
The U.S. District Court for the Eastern District of Texas issued a preliminary injunction suspending the CTA and its BOI reporting rule. This means businesses subject to the CTA are no longer required to submit initial BOI reports to FinCEN by the January 1, 2025, deadline.
Why did the court do this?
The court’s decision stems from a lawsuit challenging the CTA’s constitutionality. The plaintiffs argue the CTA exceeds Congress’s authority and violates individual privacy rights.
What does this mean for small businesses?
This is significant for clients because it’s uncharted territory. For two years, businesses were told by the federal government to prepare for this filing with little clarity on the consequences of non-compliance. The rule was clear: file by 1/1/2025. However, awareness was largely limited to accountants hesitant to get involved and attorneys who stay informed on such matters.
Now, with the deadline looming, clients are scrambling to comply. Then, seemingly out of nowhere, a court halts the entire process. This creates a significant problem: there’s no clear way to effectively inform everyone who received the opposite guidance for the past two years (or 101 out of 104 weeks, as it were). This sudden reversal leaves businesses in a state of confusion.
What should businesses do?
In light of this development, businesses should:
- Stay informed: Keep up-to-date on the latest developments in this case.
- Consult with legal counsel: Talk to a lawyer to understand how this ruling affects your business.
- Don’t assume the CTA is gone for good: It’s possible the CTA will ultimately be upheld, so businesses should be prepared to comply if necessary.
This is a developing story, and we will continue to provide updates as they become available.
