On December 3, 2024, the United States District Court for the Eastern District of Texas entered a nationwide injunction against enforcement of the Beneficial Ownership Information Reporting Requirements (the “BOI Reporting Rule”) under the federal Corporate Transparency Act (the “CTA”). Among other things, the injunction stays the January 1, 2025 deadline for a reporting company’s initial BOI Report filing.
The court issued the injunction in the case of Texas Top Cop Shop, Inc. et al vs. Garland et al. The plaintiffs in the case include several private businesses and individuals as well as the National Federation of Independent Business.
The injunction is a preliminary one. This means that the injunction may be lifted on appeal, or in further proceedings on the merits of the Constitutional issues in the case. The court indicated that it was issuing the preliminary injunction on a nationwide basis to avoid irreparable harms that may arise from enforcement of the CTA and the BOI Reporting Rule. Further, the court appears to have rejected the federal government’s arguments that the CTA is within the government’s power to regulate commerce under the Commerce Clause of the Constitution, solely for purposes of the preliminary injunction. However, the court did not address the merits of the plaintiffs’ arguments that the CTA and the BOI Reporting Rule violate the First, Fourth, Ninth and Tenth Amendments of the Constitution, and further court analysis of the Commerce Clause arguments is also likely.
Accordingly, we continue to recommend that business entities take action as soon as possible to determine if they are “reporting companies” required to comply with the BOI Reporting Rule, to identify their “beneficial owners” and “company applicants” and gather all information needed for reporting, so that, if the injunction is lifted (which could occur at any time), they are ready to submit their initial BOI reports within whatever new filing deadline is set. Nevertheless, for the time being, it appears that business entities do not need to file BOI reports until further action by the courts to the contrary.
BLM&H has previously written an extensive summary of the BOI Reporting Rule, including on topics such as what companies are “reporting companies”, how to identify a reporting company’s “beneficial owners” and “company applicants”, and what information must be included in a BOI Report (“Corporate Transparency Act Beneficial Owner Information Reporting Requirements Take Effect on January 1, 2024 – What Business Entities Need to Know and Do” found at https://blmhlaw.com/corporate-transparency-act-beneficial-owner-information-reporting-requirements-take-effect-on-january-1-2024-what-business-entities-need-to-know-and-do/).
Cases are pending in various other federal courts challenging the CTA and the BOI Reporting Rule. BLM&H will continue to monitor developments with respect to the CTA and the BOI Reporting Rule.
BLM&H can help you understand and comply with the BOI Reporting Rule. If you have questions about the BOI Reporting Rule or the temporary injunction against its enforcement, or if you need help preparing for your company’s initial, updated or corrected filings should the injunction be lifted, please contact:
Kevin J. Loechl, kloechl@blmhlaw.com, 404.266.3205
Hunter Holliday, hholliday@blmhlaw.com, 404.266.3206
Quincy H. Jackson, qjackson@blmhlaw.com, 404.266.3212
Colton E. Francoeur, cfrancoeur@blmhlaw.com, 404.266.3217