Federal government asks court to revive Corporate Transparency Act’s beneficial ownership information yet again

Small-business owners may soon be back on the hook to file a beneficial ownership information report after the federal government asked a Texas federal court to lift an injunction barring enforcement of the Corporate Transparency Act.

On Wednesday, Feb. 5, Abe McGlothin Jr., acting United States attorney for the Eastern District of Texas, notified an Eastern District federal court that the Department of Treasury plans to appeal a Jan. 7 order that killed the Corporate Transparency Act and its beneficial ownership information reporting requirements. McGlothin is asking the court to lift that injunction while the appeal is pending.

If the district court grants the federal government’s request, small-business owners will again be required to file a beneficial ownership information report. Before an injunction in a separate case filed in December took businesses off the hook, the Corporate Transparency Act required small businesses formed before Jan. 1, 2024, to file a beneficial ownership information report by Jan. 1, 2025. Businesses created between Jan. 1, 2024, and Jan. 1, 2025, had a 90-day window to file. Any companies formed after this Jan. 1 would have had 30 days to submit a report. More information about the new law and its reporting requirements can be found here.

In the event the Corporate Transparency Act is resurrected, the Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN), the agency enforcing the law, said the new filing deadline would be 30 days after the court’s ruling. Additionally, some companies may get further relief.

During the 30-day deadline extension, FinCEN will look into modifying the Corporate Transparency Act’s beneficial ownership information reporting requirements “to alleviate the burden on low-risk entities while prioritizing enforcement to address the most significant risks to U.S. national security.” It is not clear which companies may be considered low-risk. A Department of Treasury official said assessing options to change requirements aligns with the department’s commitment to reducing regulatory burdens on businesses.

As of Thursday, Feb. 6, beneficial ownership information reports were not required. FinCEN noted that businesses can continue to file voluntarily at FinCEN.gov/boi. Filing a report is free and can be done within 15 minutes for many companies.

Ping-pong court battle

Multiple cases and multiple, conflicting court rulings have left small-business owners confused about whether they need to file a beneficial ownership information report.

Several lawsuits have been filed in courts across the country challenging the Corporate Transparency Act and its beneficial ownership information reporting requirement. Two cases, both in Texas, have caused a lot of confusion. Here’s a timeline of what has gone down in those cases in recent months.

• Dec. 3: Nationwide injunction ordered in Texas Top Cop Shop case, taking companies off the hook to file beneficial ownership information report by Jan. 1
• Dec. 23: Fifth Circuit Court of Appeals motions panel reverses injunction, putting BOI requirement back into play
• Dec. 26: Fifth Circuit merits panel reverses reversal; BOI killed again
• Jan. 7: Second nationwide injunction ordered in Samantha Smith case
• Jan. 23: Supreme Court lifts Texas Top Cop injunction, but keeps Smith injunction intact; BOI remains optional, not required

The only thing keeping the federal government from enforcing the Corporate Transparency Act is the Jan. 7 injunction. With the Supreme Court having decided to lift the Dec. 3 injunction, that high court decision could inform the district court’s ruling on the pending motion to dismiss the Jan. 7 injunction.

Relief from Congress

While the courts are making the Corporate Transparency Act as confusing and frustrating as possible, two bills in Congress could provide small-business owners with much-needed relief and certainty.

Republican lawmakers are trying to kill beneficial ownership information for good with the Repealing Big Brother Overreach Act. If signed into law, the bill simply repeals the Corporate Transparency Act, killing beneficial ownership information reporting for good and rendering the court cases moot.

“The Financial Crimes Enforcement Network (FinCEN) infringes (on) American small business owners’ privacy rights by forcing them to disclose sensitive information to the government,” Rep. Warren Davidson, R-Ohio, said in a statement. “The (Corporate Transparency Act) is a disaster for small businesses and must be repealed immediately.”

As of Wednesday, Feb. 5, the Senate version of the bill had 25 co-sponsors, all Republicans. The House version had 91 co-sponsors, also all Republicans.

With Republicans holding a razor-thin majority, the fate of the Repealing Big Brother Overreach Act is questionable. However, another bill addressing beneficial ownership information has bipartisan support.

The Protect Small Business from Excessive Paperwork Act would extend the beneficial ownership information reporting deadline to Jan. 1, 2026, for most small businesses. That one-year delay could allow time to inform affected companies about the requirements while also letting the court cases play out without the uncertainty that comes with conflicting court rulings.

“America’s small-business owners have been on an unwelcome rollercoaster ride with the various lawsuits across the country, wondering when and whether they need to comply,” National Small Business Association President Todd McCracken said in a statement. “I cannot stress how important some kind of certainty is on filing these beneficial ownership information reports, and Congressman Nunn’s bill would do exactly that.”

Introduced in the House by Rep. Zach Nunn, R-Iowa, the bill has nine co-sponsors, including two Democrats. LL