By admin 
A federal appeals court has vacated a lower court’s ruling that hit the pause button on the Corporate Transparency Act, effectively restoring reporting requirements for beneficial ownership information for small businesses.
On Monday, December 23, the Fifth Circuit Court of Appeals reversed the Texas federal district court’s December 3 order regarding a nationwide preliminary injunction on enforcement of the Corporate Transparency Act. The appeals court order puts the reporting of beneficial ownership information back into play, just a few weeks after it was struck down and about a week before the Jan. 1 deadline. However, that period has been extended.
Effective January 1, 2024, the Corporate Transparency Act requires small businesses with 20 or fewer full-time employees to submit beneficial ownership information to the Treasury Department’s Financial Crimes Enforcement Network (FinCEN). Originally, companies incorporated before January 1, 2024 were required to submit that report by January 1, 2025. However, FinCEN extended that deadline to January 13 in light of the two weeks the court’s preliminary injunction was in effect.
Companies incorporated after January 1, 2024, but before January 1, 2025 must submit information within 90 days. However, FinCEN has also extended that deadline for recently incorporated companies. Companies incorporated on or after September 4, 2024, that had a filing deadline between December 3, 2024 and December 23, 2024, have until January 13 to file their initial beneficial ownership information reports. Corporations incorporated on or after December 3 and on or before December 23 have an additional 21 days from their original filing deadline.
Finally, the Corporate Transparency Act requires all companies incorporated after January 1, 2025 to file a beneficial ownership information report within 30 days of incorporation. That term has not changed.
To submit beneficial ownership information, please visit fincen.gov/boi. For more information about the Business Transparency Act, click here.
The Corporate Transparency Act and its beneficial ownership disclosure requirements have caused confusion and controversy over the past twelve months, prompting lawsuits and action by some members of Congress.
At least two federal lawsuits have been filed against the new law. In March, a federal district court in Alabama the National Small Business Association has granted its request for a preliminary injunction to stop enforcement of beneficial ownership information. However, the order only applied to the association’s members, leaving the new reporting intact for the vast majority of affected businesses.
On December 3, a federal district court in Texas granted Texas Top Cop Shop’s request for a preliminary injunction, also finding the Corporate Transparency Act unconstitutional. This time the national ban applied to everyone, effectively killing the new rule less than a month before the deadline for reporting beneficial ownership information for the vast majority of small businesses.
The federal government has appealed this decision asked both the Fifth Circuit and the district court to reverse the order. Two weeks after the order was issued, the district court denied the government’s proposal to reinstate beneficial ownership information reporting, putting small business owners who had yet to comply with the requirement off the hook two weeks before the original deadline were held.
However, in an emergency motion to reverse the order, the Fifth Circuit revived the Corporate Transparency Act and its reporting requirements for beneficial ownership information. FinCEN immediately reset the deadlines.
In its decision, the appeals panel found that the federal government is likely to succeed in its claims that the new law is constitutional, leaving the fate of the two lawsuits in doubt.
The Fifth Circuit ruled only on the motion to stay the preliminary injunction. However, it also ordered that the appeal against the district court’s finding of unconstitutionality be expedited, paving the way for a decision on this issue sooner rather than later.
For now, the majority of small business owners are back on the hook to file beneficial ownership information reports by January 13 or face hefty fines. LL