On December 3, 2024, the United States District Court for the Eastern District of Texas issued a nationwide injunction preventing the Government from enforcing the Corporate Transparency Act of 2021 (the “Act”). The Act generally requires many companies to report the identity of their beneficial owners (“BOI”) to the Financial Crimes Enforcement Network (“FINCEN”), a division of the United States Treasury, no later than January 1, 2025. Companies formed during 2024 also have a reporting obligation within 90 days of formation and companies formed thereafter must file within 30 days of formation. The Act imposes significant penalties for failure to file.
Many clients are asking whether to proceed with BOI filings in light of the nationwide injunction. Neither the Department of Justice nor FINCEN have yet commented on the issuance of the injunction or provided any direction or guidance to businesses. Under the circumstances, we expect the Department of Justice to appeal the issuance of the nationwide injunction against enforcement of the Act. An appellate court could overturn the injunction prior to the Act’s January 1, 2025 deadline, and companies that wait to file may be left with little or no time to react.
The FINCEN website continues to accept filings, and, in the absence of additional guidance, we believe the cautious and prudent strategy is to proceed with preparation and filing. If you decide to wait to see the outcome of this litigation, we suggest that you proceed to gather all required information to make the filing. In this way, you will be fully prepared if the filing must occur within a short period of time before the January 1, 2025 deadline.
Gallagher & Kennedy attorneys are prepared to assist you with the analysis necessary to comply with the Act and to assist you with the filing. Please reach out to your G&K attorney or the author of this Client Alert for additional information.
About the Author
Recognized as a Certified Tax Specialist by the State Bar of Arizona's Board of Legal Specialization, Otto Shill helps individuals, business owners, and employers comply with and plan for laws and regulations related to federal and state taxation, employee benefits, and executive compensation. He assists clients with audits, investigations, and regulatory disputes related to these areas and advises business owners on various transactions and long-term succession and estate planning.
Otto earned his LL.M. in taxation from Boston University and his J.D. and B.S. in accounting from Brigham Young University. He is admitted to practice before all state and federal courts in Arizona, the U.S. Tax Court, the U.S. Court of Federal Claims, the U.S. Court of Appeals for the District of Columbia, and the U.S. Supreme Court.