Federal Court Temporarily Halts BOI Reporting Requirements

A federal district court in Texas has issued a nationwide preliminary injunction halting enforcement of the Corporate Transparency Act (CTA) and its beneficial ownership information (BOI) reporting requirements. The ruling, issued on December 3, 2024, found that the CTA likely exceeds Congress’ constitutional authority and temporarily suspends the January 1, 2025, reporting deadline for businesses. AAFCPAs advises that clients remain informed about ongoing developments and maintain readiness to comply with reporting obligations should the injunction be lifted. This decision introduces uncertainty for businesses, as further legal challenges and potential appeals could change the enforcement status.

Background on BOI Reporting

The CTA, enacted in 2021 as part of broader anti-money-laundering efforts, requires companies to disclose information about their beneficial owners and, in some cases, individuals who file applications to form business entities. Failure to comply with the reporting requirements carries severe penalties, including civil penalties of up to $591 per day along with criminal penalties of up to $10,000 and potential prison time for willful violations. These mandates have raised significant concerns among small business owners and their advocates due to their complexity and administrative burden.

Constitutional Challenge

On December 3, 2024, a federal district court in Texas issued a nationwide preliminary injunction, halting enforcement of the CTA and its BOI reporting requirements and describing it as a “quasi-Orwellian” measure outside the scope of the Commerce Clause and Necessary and Proper Clause. This ruling stems from a case brought by several plaintiffs, including the National Federation of Independent Business (NFIB), who argued the legislation intrudes on states’ rights to regulate businesses. While the court agreed, it did not address additional constitutional challenges under the First and Fourth amendments.

What Happens Next

For now, the ruling means businesses may not need to comply with the January 2025 BOI reporting deadline. However, this decision is likely to be appealed by the U.S. Treasury Department. If the appeal proceeds, enforcement could resume depending on the outcome.

FinCEN, the agency responsible for enforcing the CTA, is reviewing the order. Business groups, including the American Institute of CPAs (AICPA) and the National Small Business Association (NSBA), have welcomed the ruling as a much-needed reprieve for small businesses navigating the complex regulatory landscape.

How We Help

At AAFCPAs, we combine 50 years of proven tax expertise with a client-focused approach to help businesses navigate complex regulatory environments, including the evolving BOI reporting requirements under the Corporate Transparency Act (CTA).

Our team closely monitors regulatory developments that affect clients. If the injunction is lifted or the rules are clarified, we will help you navigate compliance efficiently while minimizing administrative burdens. Our multidisciplinary team of CPAs and tax strategists deliver tailored strategies designed to align with your financial goals and protect your business interests.

If you have questions, please contact Erica Nadeau, CPA, MST, Tax Partner at 774.512.4111 or enadeau@nullaafcpa.com—or your AAFCPAs Partner.