In Whiplash Maneuver, Court Rules Beneficial Ownership Information (BOI) Reporting Requirements Are On Hold

Stop me if you’ve heard this one before: the beneficial ownership information (BOI) filing requirements are temporarily on hold.

In a late December ruling, the government has (again) been enjoined from enforcing the BOI reporting requirements under the Corporate Transparency Act (CTA). A December 26 order from the Fifth Circuit has reversed an earlier ruling granting a stay.

A stay is a court order that stops a legal proceeding—it’s usually temporary.

Here’s what happened.

Last-Minute Scramble

On December 23, 2024 ruling, a unanimous Fifth Circuit bench granted the government’s emergency motion for a stay of a preliminary injunction, pending an appeal. Earlier in the week, a judge in Texas ruled that a nationwide preliminary injunction barring the Financial Crimes Enforcement Network, or FinCEN, from enforcing the CTA would stand.

The reversal initially meant that businesses that were required to file BOI reports must file while the government’s appeal winds its way through the court system unless they are otherwise exempt.

Emergency Motion

The ruling was in response to an emergency motion filed by the government with the U.S. Court of Appeals for the Fifth Circuit arguing for an immediate stay. Noting that the injunction that had been filed barring FinCEN from enforcing the CTA was nationwide, the government wrote, “the balance of harms tips sharply in favor of the government and any injunction in any event should have been limited to the handful of companies who identified themselves before the district court.”

In a December 23 ruling, a unanimous Fifth Circuit bench granted the government’s emergency motion for a stay pending the appeal.

In the opinion, Circuit Judges Stewart, Haynes, and Higginson poked holes at the district court ruling, writing, “Independently, the government has made a strong showing against the Businesses’ facial challenge to the CTA.” That means, the court wrote “Here, the CTA at least operates constitutionally when it requires that corporations engaged in business operations affecting interstate commerce disclose their beneficial owner and applicant information to [FinCEN],” before concluding, “Thus, the statute is likely constitutional on its face.”

The panel had no sympathy for fears of a last-minute scramble, writing, “The Businesses warn that lifting the district court’s injunction days before the compliance deadline would place an undue burden on them. They fail to note, however, that they only filed suit in May 2024 and the district court’s preliminary injunction has only been in place for less than three weeks as compared to the nearly four years that the Businesses have had to prepare since Congress enacted the CTA, as well as the year since FinCEN announced the reporting deadline.”

You can read the December 23 order here.

FinCEN Response To The Fifth Circuit

In response, FinCEN posted a message to its website just before the Christmas holiday, extending the reporting deadline.

Under the law as written, a reporting company created or registered to do business before January 1, 2024, will have until January 1, 2025, to file its initial report. This is true even if the company was created years before 2024. That deadline has been extended to January 13, 2025.

A reporting company created or registered on or after January 1, 2024, and before January 1, 2025, will have 90 calendar days after receiving notice of the company’s creation or registration to file its initial report. However, under the relief granted by FinCEN, reporting companies created or registered on or after September 4, 2024, with a filing deadline between December 3, 2024 and December 23, 2024 now have until January 13, 2025 to file. Additionally, reporting companies created or registered on or after December 3, 2024, and on or before December 23, 2024, have an additional 21 days to file.

Reporting companies that qualify for disaster relief may have extended deadlines that fall beyond January 13, 2025. According to FinCEN, these companies should abide by whichever deadline falls later.

(For more on the reporting requirements, see this previous article.)

FinCEN also confirmed that plaintiffs in National Small Business United v. Yellen—Isaac Winkles, reporting companies for which Isaac Winkles is the beneficial owner or applicant, the National Small Business Association, and members of the National Small Business Association as of March 1, 2024—are not currently required to report their beneficial ownership information to FinCEN at this time.

Surprise Ruling

On December 26, the Fifth Circuit issued an order once again staying the injunction. Noting the government appeal and the December 23 ruling, the court explained that the appeal has been expedited to the next available oral argument panel.

(Remember, a preliminary injunction—and any ruling related to the preliminary injunction—is not a final resolution of a case.)

However, the court wrote, “in order to preserve the constitutional status quo while the merits panel considers the parties’ weighty substantive arguments, that part of the motions-panel order granting the Government’s motion to stay the district court’s preliminary injunction enjoining enforcement of the CTA and the Reporting Rule is VACATED.”

(Vacate is a legal term meaning to set aside a previous judgment or order.)

What that means is that the part of the ruling that stayed the injunction has been removed—meaning that the injunction is now back in play.

You can read the unpublished order here.

Reactions

The order caught many—including me—by surprise. Reactions on social media ran the gamut from disbelief to relief to anger.

Molly Day, Vice President of Public Affairs for the National Small Business Association, said in a statement to Forbes, “Any delay to this unconstitutional rule is a good thing.”

She continued, “Although the initial reversal of the Fifth Circuit Court’s temporary injunction cites the fact that small businesses have had months to prepare for the rule, given the flurry of action on Capitol Hill and in NSBA’s lawsuit and those that followed ours, it’s not wonder there is massive confusion about when the BOI reports are due. We appreciate this latest delay and urge the courts—and lawmakers—to provide some level of certainty and extend a more long-term delay and ultimately repeal or overturn this law.”

Previous History

In Texas Top Cop Shop, Inc., et al. v. Garland, et al., Judge Amos Mazzant, an Obama appointee, granted the request of the National Federation of Independent Business (NFIB) for a preliminary injunction, blocking the U.S. Department of Treasury from enforcing the CTA’s reporting requirements. Because NFIB and its nearly 300,000 members were a party to this case, the judge blocked enforcement of the BOI reporting requirements nationwide.

On December 17, 2024, Mazzant ruled that a nationwide preliminary injunction barring FinCEN from enforcing the Corporate Transparency Act (CTA) would stand. Mazzant had previously granted the plaintiffs’ request for a preliminary injunction, blocking the U.S. Department of Treasury from enforcing the CTA’s reporting requirements.

That preliminary injunction was appealed to the Fifth Circuit which led to the current flurry of legal actions.

Latest Actions

The latest action should mean that the injunction is back on—the original district court injunction barring FinCEN from enforcing the BOI reporting requirements remains in force.

The injunction should not impact the FinCEN extension. However, if the Fifth Circuit court proceedings continue beyond the January 13, 2025, deadline (or other deadlines), as it certainly looks to be (keep reading), it should be the case that the CTA should not be enforceable barring any additional rulings.

The court proceedings are continuing to move through the system. In response to a request for a rehearing en banc, the court requested that the government file a response by noon on December 31, 2024.

(En banc is French—surprisingly, not Latin—for on the bench. It means that all judges of a particular court will hear a case. This happens when a matter is particularly complex or important.)

Part of the December 23 order was also the granting of the motion to expedite the appeal. As of December 27, briefs are now due in February and the case is calendared for oral arguments on March 25, 2025.

If this sounds confusing, it’s because there are several moving parts. The injunction was preliminary—the merits of the case have not been heard in the Fifth Circuit yet. That’s what’s moving through the system now.

The other bits are largely related to procedure (the stay of the preliminary injunction, for example, was requested by the government while the matter is being heard).

A request to FinCEN for comment was not immediately returned.

Other Court Rulings

The Top Shop case isn’t the only case pending in the courts. In addition to National Small Business United v. Yellen referenced by FinCEN above, two other courts—the United States Court of Appeals for the Fourth Circuit and the United States Court of Appeals for the Ninth Circuit—also have CTA case appeals on their dockets.

(Note: Updated to reflect a statement from the NSBA and additional details about the next steps.)

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