CTA Update: Beneficial Ownership Information Reports Once Again Voluntary

Key Takeaways:

• Nationwide Injunction Reinstated: The 5th Circuit Court of Appeals reinstated an injunction against the Corporate Transparency Act’s enforcement on December 26, 2024.
• BOIR Filing Currently Voluntary: Reporting companies are not required to file Beneficial Ownership Information Reports while the injunction is in place.
• Legal Challenge Ongoing: The constitutionality of BOIR filings is still being challenged in court.
• FinCEN Accepts Voluntary Filings: The Financial Crimes Enforcement Network continues to accept voluntarily filed BOIRs during the injunction.
• Companies Should Prepare to File: Businesses should collect necessary ownership information and be ready to file if the injunction is lifted.

Beneficial Ownership Reporting Remains Voluntary Amid Legal Battle

Reporting companies are navigating a shifting legal landscape as the requirement to file Beneficial Ownership Information Reports (BOIRs) under the Corporate Transparency Act (CTA) has once again become voluntary. A series of court rulings has led to the reinstatement of a nationwide injunction, leaving companies to grapple with compliance uncertainties.

A Timeline of Legal Developments

On December 3, 2024, a nationwide injunction against the enforcement of the CTA was issued, effectively pausing mandatory BOIR filings. This injunction was vacated on December 23, 2024, by the 5th Circuit Court of Appeals, briefly reinstating the filing requirements.

However, just days later, on December 26, 2024, the 5th Circuit Court of Appeals reinstated the injunction against the CTA’s enforcement. This back-and-forth in legal decisions has created an atmosphere of uncertainty for reporting companies.

“Reporting companies are not currently required to file Beneficial Ownership Information Reports with FinCEN.”

Implications for Reporting Companies

With the injunction back in effect, the filing of BOIRs is currently voluntary. The Financial Crimes Enforcement Network (FinCEN) continues to accept these reports from companies that choose to file them.

Ongoing Constitutional Challenge

The underlying legal case challenging the constitutionality of the BOIR filing requirements remains pending. The outcome of this case could have significant implications for the future enforcement of the CTA.

Staying Prepared Amid Uncertainty

Given the recent fluctuations in the legal rulings, reporting companies are advised to monitor the situation closely. Organizations that opt not to file BOIRs during the injunction should proactively collect the necessary beneficial ownership information. This preparation will enable them to file promptly if the injunction is lifted and the filing requirement is reinstated.

FinCEN’s Position

Despite the injunction, FinCEN remains open to receiving BOIRs from companies that voluntarily submit them. This openness allows businesses to maintain compliance practices according to their risk assessments and compliance strategies.

Looking Ahead

As the legal proceedings continue, companies must stay informed about developments that could impact their reporting obligations. Maintaining readiness and understanding the current requirements under the CTA will be crucial for compliance and operational continuity.

Conclusion

The reinstatement of the nationwide injunction against the CTA’s enforcement has temporarily shifted BOIR filings from mandatory to voluntary. Reporting companies should use this time to prepare and stay alert to any changes resulting from ongoing legal challenges. By proactively gathering ownership information and monitoring the situation, businesses can ensure they remain compliant and ready to act when necessary.