Just three days after a federal court of appeals panel reversed a pause on the Corporate Transparency Act, a different panel vacated that reversal, taking small-business owners off the hook to submit a beneficial ownership information report yet again.
On Thursday, Dec. 26, a Fifth Circuit Court of Appeals merits panel vacated a Monday, Dec. 23 motions panel order lifting a nationwide injunction on the Corporate Transparency Act. Effectively, affected small businesses do not have to comply with the law’s beneficial ownership information reporting requirements.
The latest court ruling adds to an already chaotic situation with the Corporate Transparency Act and affected businesses. Throughout the year, small businesses have complained about a lack of awareness, resulting in a compliance rate of less than 10% halfway into the year. At least two federal lawsuits have challenged the law’s constitutionality.
Effective since Jan. 1, the Corporate Transparency Act requires small businesses with 20 or fewer full-time employees to submit beneficial ownership information to the Treasury Department’s Financial Crimes Enforcement Network (FinCEN). Initially, companies formed before Jan. 1 had until Jan. 1, 2025, to submit that report. Businesses formed after had 90 days from formation to file, and companies formed after Jan. 1, 2025, would have a 30-day window.
As of Friday, Dec. 27, small-business owners affected by the Corporate Transparency Act do not have to file a beneficial ownership information report.
For more information about the Corporate Transparency Act, click here.
Tug-of-war between small businesses and the federal government
Despite multiple wins in the courtroom, confusion over beneficial ownership information requirements has been exacerbated.
In March, an Alabama federal court ordered an injunction on the Corporate Transparency Act. However, the order applied to only the plaintiffs, the National Small Business Association and its members, leaving the vast majority of affected companies on the hook.
On Dec. 3, a Texas federal court ordered a nationwide injunction that applied to all affected businesses, effectively killing the Corporate Transparency Act less than a month before the Jan. 1, 2025, deadline for most companies to file their beneficial ownership information report.
Following the first injunction, corporate law attorney Hershel Howard of the law firm Foley & Lardner confirmed with Land Line that by blocking the entire Corporate Transparency Act, new companies that have not already filed are also off the hook.
However, that reprieve from the new filing would be short-lived.
Two days before Christmas, the Fifth Circuit gifted the federal government with a grant to its emergency motion to stay the injunction, putting the beneficial ownership information reporting requirement back into play about a week before the original deadline. However, FinCEN extended that deadline by two weeks.
Now, the Fifth Circuit has essentially reversed its own order. The Monday, Dec. 23 order was filed by a panel overseeing the emergency motion to stop the injunction. That order also called for the court to expedite the federal government’s motion challenging the district court’s ruling on constitutionality. A different panel overseeing that motion disagreed with the other panel’s findings and vacated its order.
If this all sounds confusing, it’s because it is. If you are a small-business owner affected by the Corporate Transparency Act, here is the only thing you need to know: You are not required to submit a beneficial ownership information report.
However, as has been seen in less than one month, that can change in a matter of days. In the meantime, FinCEN is encouraging business owners to voluntarily submit a beneficial ownership information report. To file beneficial ownership information, go to fincen.gov/boi. If you have any concerns about whether to file the beneficial ownership information, OOIDA recommends contacting your attorney. LL
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