Subject to 23 exemptions, the BOI Rule requires legal entities formed or registered to do business in the United States to report beneficial ownership information to a national database maintained by the Financial Crimes Enforcement Network (“FinCEN”) within the U.S. Department of the Treasury.
The BOI Rule took effect January 1, 2024, and its implementation was bifurcated:
- Entities formed or first registered during 2024 have been required to file initial reports within 90 days of notice of formation or registration.
- Entities that were formed or first registered prior to 2024 would be required to file their initial reports by January 1, 2025.
While the situation continues to develop, the preliminary injunction will have significant implications, particularly given the rapidly approaching January 1 initial reporting deadline for entities formed or registered prior to 2024.
- Is the CTA dead?
No. The District Court issued a preliminary injunction, which temporarily prohibits FinCEN from enforcing the CTA and BOI Rule pending final resolution of the lawsuit challenging the CTA’s constitutionality.
- What will happen if the injunction is lifted?
If the injunction is lifted, either by the District Court or on appeal, enforcement of the CTA could resume. Absent relief from FinCEN or the courts, the original reporting deadlines would be reinstated at that point.
Since January 1, 2024, FinCEN has issued multiple, six-month extensions to legal entities whose principal places of business were located in areas affected by natural disasters. Notably, with only one exception, these extensions did not provide relief for legal entities formed prior to 2024 (leaving the original January 1, 2025 deadline in place).
In the event the injunction is lifted, one possibility is that FinCEN may grant more limited relief—for example, an extension spanning the period of time that the injunction remains in place. The practical effect of this step would be to “freeze” the time remaining until the reporting deadline, as it existed immediately prior to issuance of the injunction.
The District Court’s order reflects its own expectation that final resolution on the merits of the challenge will take some time (well past the January 1 deadline). Thus, the prospect of any prompt change to the District Court’s injunction would depend on the government seeking expedited relief at the Fifth Circuit Court of Appeals to stay the injunction.
- How should we proceed?
While the injunction remains in place, we believe it would be reasonable for reporting companies to pause submitting new filings to the FinCEN database, given that the injunction imposes a nationwide prohibition against enforcement of the BOI Rule.
If the injunction is lifted, enforcement of the CTA could resume, subject to any relief granted by FinCEN or from the courts in unwinding the injunction. While we think it is quite likely that either the courts or FinCEN will grant some time relief to filing parties—and that is especially true in the event the injunction remains in place through January 1, 2025—it is too early to know if such relief would be granted (or for how long).
Reporting companies of course remain free to continue preparing filings, without submitting them, to be in a position to comply if the injunction is lifted.
We will continue to monitor for updated developments in response to this injunction.
- Texas Top Cop Shop v Garland et al. (case 4:24-cv-00478).
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