Reporting companies can continue to voluntarily file beneficial ownership information (BOI) reports while the Corporate Transparency Act (CTA), PL 116-283, is suspended, according to the Financial Crimes Enforcement Network (FinCEN). a warning this week.


The warning followed a district court order last week that issued a preliminary injunction on enforcement of the CTA and the BOI reporting requirement.


FinCEN said that while the preliminary injunction remains in effect, “reporting companies are not currently required to submit their beneficial ownership information to FinCEN and will not be liable if they fail to do so while the preliminary injunction remains in effect. companies may continue to voluntarily file beneficial ownership information reports.”


In the courts


In the order issued last week by the United States District Court for the Eastern District of Texas in Texas Top Cop Shop, Inc. vs. GarlandNo. 4:24-CV-478 (ED Tex. 12/3/24), the court ruled that the CTA is likely unconstitutional.


Under the order, the CTA and the BOI reporting rule are unenforceable, and reporting companies are not required to comply with the CTA reporting deadline of January 1, 2025, pending a new order from the court.


The Department of Justice (DOJ) filed an appeal on December 5.


Previously, the DOJ appealed to the Eleventh Circuit an Alabama district court decision that the CTA was unconstitutional. In that case, however, the court said the order only applied to the plaintiffs named in the case. The Eleventh Circuit heard oral arguments in the case in September.


In its warning, FinCEN notes that the Texas case is just one of several ongoing cases in which plaintiffs have challenged the CTA. District Courts in Virginia, in Community Associations Institute v. Yellenno. 1:24-cv-1597 (ED Va. 9/10/24), and in Oregon, in Firestone vs. YellenNo. 3:2024cv01034 (D. Ore. 9/20/24), denied motions to enjoin the CTA, finding the plaintiffs were unlikely to succeed on their constitutional arguments, FinCEN said.


According to the warning, consistent with the conclusions of those district courts, the government continues to believe that the CTA is constitutional.


Background


Under the CTA, which Congress passed in 2021 as an anti-money laundering initiative, reporting companies must disclose the identity and beneficial ownership information of the entities. For new entities incorporated after January 1, 2024, reporting companies must also disclose the identity of “applicants” – defined as any person applying to form a partnership, limited liability company or other similar entity.


Intentional violations are punishable by a fine of $591 per day, up to $10,000, and two years in prison with similarly severe penalties for unauthorized disclosure.


AICPA Advocacy


The AICPA has urged CPAs who assist clients with BOI reporting to be prepared.


According to a statement from the AICPA: “Best practices require that those assisting clients in filing BOI reports at least collect the required information from the clients and be prepared to file the BOI report if the order is lifted. While it is unlikely that the order will be lifted before the final outcome of the proceedings, we recommend being prepared in the event that a reversal occurs.”


The AICPA has one BOI Reporting Center.


– If you would like to comment on this article or suggest an idea for another article, please contact Martha Wagoner at Martha.Waggoner@aicpa-cima.com.




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