NEWS: A federal court in Texas recently ruled that the Corporate Transparency Act (CTA) – which requires certain companies to report “beneficial ownership information” (BOI) to FinCEN – is likely unconstitutional. The court preliminarily “enjoined” (i.e., temporarily prevented) enforcement of the CTA nationwide. The government will likely appeal the decision and ask the trial court to “stay” (put a hold on) the injunction while the appeal is pending. The League will monitor events and let you know about developments.
The new court ruling means that the BOI rules cannot be enforced for now. As a result, FinCEN has issued an alert on its BOI homepage, saying that reporting companies are not currently required to file any reports and will not be subject to liability while the court’s decision stands. “Nevertheless, reporting companies may continue to voluntarily submit beneficial ownership information reports,” FinCEN wrote.
The Texas litigation is one of several cases pending before courts around the country that challenge the CTA. In March, a federal court in Alabama declared the CTA unconstitutional, as this Courier explained. The court permanently prevented the government from enforcing the CTA, but only as to the plaintiffs in that case. The government appealed, and a federal appeals court case remains pending.
For an explanation of the BOI rules and their significance to credit unions, please see this Compliance Courier.
For more information about the recent decision by the federal court in Texas, please see this Legal Update from Husch Blackwell, The League’s outside attorneys.