Supreme Court Clears Path for BOI Reporting—But Legal Hurdles Remain
In a significant development for businesses, the U.S. Financial Crimes Enforcement Network (FinCEN) confirmed on Friday that companies covered by the Corporate Transparency Act’s (CTA) Beneficial Ownership Information (BOI) reporting requirements will not need to file their reports while a nationwide injunction remains in effect. The decision stems from legal challenges to the CTA’s implementation, with one injunction still blocking the rule, even though other aspects of the rule’s enforcement have been allowed to proceed.
The Status of the Injunction and Reporting Requirements
FinCEN clarified that companies will not face penalties for failing to file BOI reports while the injunction remains in place. However, companies may still choose to voluntarily submit their reports, and FinCEN noted that it estimates approximately 32 million small businesses are covered by the CTA’s reporting provisions. These businesses may opt to submit BOI data at their discretion, but they are not obligated to do so during the injunction period.
The injunction in question stems from two separate legal cases, both challenging the CTA’s reporting mandates. The first case, Top Cop Shop, Inc. v. Garland, led to a nationwide injunction issued by a district court in Texas. Although the U.S. Supreme Court issued a stay of the injunction on Thursday, allowing parts of the CTA rule to move forward, a second injunction issued by a different Texas court remains in effect.
The Texas Public Policy Foundation’s Lawsuit
The second injunction arises from a lawsuit filed by the Texas Public Policy Foundation (TPPF), representing plaintiffs Samantha Smith and Robert Means, who argued against the reporting requirements. The case, Samantha Smith and Robert Means v. U.S. Department of the Treasury, was decided on January 7, 2025, by a district court in Texas. The TPPF stated in a news release that their case is based on different facts and legal arguments from the case before the Supreme Court. As of now, the U.S. Department of Justice has not filed a notice of appeal in the case, leaving the injunction in place for the time being.
Background on the Corporate Transparency Act (CTA)
The Corporate Transparency Act, passed by Congress as part of the National Defense Authorization Act in 2021, was designed to strengthen U.S. anti-money laundering measures by increasing transparency in corporate ownership structures. Under the CTA, reporting companies—including corporations, limited liability companies (LLCs), and similar entities—are required to disclose the identities of their beneficial owners. This means that entities must provide personal details about the individuals who ultimately control or benefit from the company.
For new entities formed after January 1, 2024, the CTA also mandates that the identities of “company applicants”—the individuals who file the paperwork to form a new company—be disclosed as part of the reporting process. The intent behind these requirements is to make it more difficult for bad actors to hide behind complex corporate structures, improving the ability of law enforcement to combat financial crimes such as money laundering, terrorism financing, and tax evasion.
Potential Impact on Small Businesses
While the delay in the implementation of the BOI reporting requirement may be seen as a reprieve for many businesses, it also introduces continued uncertainty about when the rule will ultimately go into effect. Approximately 32 million small businesses, many of which are newly established or have a simple ownership structure, would be required to file these reports once the injunction is lifted and the rule is enforced.
Businesses impacted by the CTA’s reporting requirements are encouraged to continue monitoring legal developments, as the status of the injunction could change quickly, potentially resulting in a new deadline for compliance. In the meantime, businesses may want to consider reviewing their ownership structures and preparing the necessary information in anticipation of eventual compliance.
Looking Ahead
While the legal challenges to the CTA’s BOI reporting requirements create delays, they have also brought attention to the broader goals of corporate transparency and financial integrity. Businesses, particularly small ones, will need to stay informed about the shifting legal landscape and be prepared to comply with the BOI requirements once the injunction is lifted or a final ruling is made.
The delay gives small businesses additional time to understand the full scope of their compliance obligations under the CTA. At the same time, the ongoing legal battles highlight the complexity of balancing anti-money laundering efforts with concerns over privacy and regulatory burden.
As the case moves through the courts, businesses and other stakeholders are advised to stay engaged with FinCEN’s updates and to prepare for the eventual implementation of the Corporate Transparency Act’s BOI reporting rules. With the financial community closely watching these developments, the future of corporate transparency in the U.S. remains an evolving issue, one with wide-ranging implications for business operations and the fight against financial crime.
