Beneficial Ownership Reporting

Less than a month before a Jan. 1 deadline for businesses to report their beneficial owners to the Financial Crimes Enforcement Network, the U.S. District Court for the Eastern District of Texas ruled that the Corporate Transparency Act (CTA) is “likely unconstitutional." A federal judge in Texas has issued a preliminary injunction blocking enforcement of the requirement. The order states that covered companies nationwide do not need to comply with the Jan. 1 reporting deadline, unless the judge or a higher court reverses the order in the meantime.

Nevertheless, FinCEN stated that it will permit reporting companies to continue to voluntarily submit beneficial ownership information reports. FinCEN did not advise whether there will be a grace period for compliance if the injunction is overturned on appeal.

Given the uncertainty surrounding the outcome of this case, reporting companies who have yet to file their initial beneficial ownership information reports should be prepared to file on short notice in the event the preliminary injunction is overturned. Likewise, reporting companies that have already filed should continue to document any changes to information previously reported and should be ready to file updated or corrected reports relating to changes or developments that occur during the pendency of the preliminary injunction. Reporting companies may also choose to voluntarily file initial or updated reports at any time despite the preliminary injunction.

For BOI filing and reporting information, visit: https://www.fincen.gov/boi