Legal Alert: Updated FinCEN Response To Beneficial Owner Information Filing Requirement Enjoinment Nationwide
Last week, we reported that, pursuant to the Memorandum Opinion and Order in Texas Top Cop Shop, Inc., et al. v. Garland, et al., Case No. 4:24-cv-478, the Beneficial Ownership Report regulations at 31 C.F.R. 1010.380 (the “BOI Regulations”) under the Corporate Transparency Act (“CTA”) were enjoined nationwide. The United States Department of the Treasury’s Financial Crimes Enforcement Network or “FinCEN” has now issued a response to the ruling.
In an update to their website, they stated that, “While this litigation is ongoing, FinCEN will comply with the order issued by the U.S. District Court for the Eastern District of Texas for as long as it remains in effect. Therefore, reporting companies are not currently required to file their beneficial ownership information with FinCEN and will not be subject to liability if they fail to do so while the preliminary injunction remains in effect. Nevertheless, reporting companies may continue to voluntarily submit beneficial ownership information reports.”
FinCEN also reported, however, that, “The government continues to believe…that the CTA is constitutional.” Further, the Department of Justice, on behalf of the Department of the Treasury, filed a Notice of Appeal of the Texas decision on December 5, 2024. The conditional nature of the statement along with the notice of appeal creates the appearance that cooperation with the Texas Order may be grudging, and that if the injunction is lifted, FinCEN might begin enforcement without delay. This would indeed leave businesses scrambling to comply, potentially with no or a very small window to do so.
Given the murky Constitutional authority of the CTA, businesses may understandably not want to file reports that may never be necessary. On the other hand, if they are, the window for compliance may be so small that they need to be ready to do so immediately. Even without the pressure of an immediate compliance deadline, the filing website was often overwhelmed during December. A rush to comply would seemingly doom the system to frequent delays. If you own a business that is required to file a report under the CTA and you have not yet filed, please contact your attorney for advice.