Fifth Circuit Stays Injunction of CTA, Reinstating Reporting Deadline of January 1, 2025

Fifth Circuit Stays Injunction of CTA, Reinstating Reporting Deadline of January 1, 2025

Yesterday afternoon, the Fifth Circuit Court of Appeals granted the federal government’s Motion to Stay the injunction that had temporarily blocked new reporting requirements covering about 32.6 million small businesses. This means that the filing deadline for the “beneficial ownership information” (BOI) report under the Corporate Transparency Act (CTA) is now again January 1, 2025. Failure to file the BOI report before the deadline may result in penalties of up to $591 per day. For more information on the BOI report and to file your report, click here.

Background: Small businesses with less than $5 million in annual revenue and less than 20 full-time employees are required to report on their ownership structure, business addresses, and other information to the Financial Crimes Enforcement Network (FinCEN), a subagency of the Treasury Department. Before yesterday’s court decision, a lower court had halted the reporting requirements pending ongoing litigation. The original Continuing Resolution (CR) funding the federal government until March 14, 2025, also had a mandatory one year reporting delay, but the final pared down version that recently became law stripped out the one year extension language.

The problem: The Treasury Department reported in October that it had received just 10% of the required submissions to comply before penalties would begin in 2025. Many attributed the low compliance rate to a lack of awareness among small businesses, insufficient outreach & education from the federal government, and a tight time frame for compliance. Given that imminent deadline, which businesses across the nation no longer think applies to them, the practical implications of the government’s demand to stay the injunction could be severe. The decision yesterday gives businesses impacted by this reporting requirement less than one week to comply.

What’s next: Litigation in this particular case continues but in the meantime, the Court of Appeals held that the government has made a strong showing against the businesses’ facial challenge to the constitutionality of the CTA and has allowed the law to be enforced pending the final outcome of the litigation.