*UPDATED 12/11/24* The U.S. District Court for the Eastern District of Texas, in a case styled Texas Top Cop Shop, Inc. v. Garland, issued a preliminary injunction against the enforcement of the CTA. Unlike the injunction issued in the National Small Business United decision, which injunction benefited only the members of that trade association, the injunction issued this week applies nationwide in favor of every company obligated to file beneficial ownership information reports with the Financial Crimes Enforcement Network. In 2021, the U.S. Congress enacted the bipartisan Corporate Transparency Act (CTA) to curb illicit finance as part of a broader anti-money laundering effort by the federal government. Effective January 1, 2024, many companies in the United States must report information about their beneficial owners—the individuals who ultimately own or control the company—to the Financial Crimes Enforcement Network (FinCEN), a bureau of the U.S. Department of the Treasury. FinCEN began accepting reports on January 1, 2024.
However, this week, the U.S. District Court for the Eastern District of Texas, in a case styled Texas Top Cop Shop, Inc. v. Garland, issued a preliminary injunction against the enforcement of the CTA. Unlike the injunction issued in the National Small Business United decision, which injunction benefited only the members of that trade association, the injunction issued this week applies nationwide in favor of every company obligated to file beneficial ownership information reports with the Financial Crimes Enforcement Network. Still, questions remain about whether an appellate court will take up the issue before the current reporting deadline of January 1, 2025, and whether other courts might disagree. The willful failure to report complete or updated beneficial ownership information to FinCEN, or the willful provision of or attempt to provide false or fraudulent beneficial ownership information may result in civil or criminal penalties, including civil penalties of up to $500 for each day that the violation continues, or criminal penalties including imprisonment for up to two years and/or a fine of up to $10,000. Senior officers of an entity that fails to file a required BOI report may be held accountable for that failure. A few details to consider when filing include:
Commerce Lexington recommends you consult your business’ legal counsel regarding further guidance if your company or business is subject to BOI reporting. Comments are closed.
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