NEW ORLEANS — The court case seeking to block enforcement of certain reporting requirements of small businesses has observers feverishly swiveling their necks like they’re watching a ping-pong match. And now the U.S. Supreme Court has become involved.
In an effort to combat money laundering and other financial crimes, the federal government passed the Corporate Transparency Act (CTA) that required most small- to mid-sized companies, including laundromats and on-demand laundry services, to document who has a hand in their operation—termed “beneficial ownership information” (BOI)—and report it to the Financial Crimes Enforcement Network (FinCEN).
Companies were directed to file the required information by a Jan. 1, 2025, deadline or possibly face civil and/or criminal penalties.
But before that deadline, there was a legal challenge and a court ruling blocked the U.S. Department of Treasury from enforcing the reporting requirements.
“In light of a recent federal court order, reporting companies are not currently required to file beneficial ownership information with FinCEN and are not subject to liability if they fail to do so while the order remains in force,” FinCEN states on its website. “However, reporting companies may continue to voluntarily submit beneficial ownership information reports.”
Here is how the matter has progressed:
- May 28, 2024 — “Texas Top Cop Shop Inc. et al v. Garland et al” is filed, with the National Federation of Independent Business (NFIB) and co-plaintiffs arguing that the CTA is unconstitutional in that it exceeds Congress’ authority over the states, improperly compels speech and contradicts the right of anonymous association guaranteed by the First Amendment, and violates the Fourth Amendment by forcing the disclosure of private information.
- Dec. 3, 2024 — The U.S. District Court for the Eastern District of Texas, Sherman Division, issues an order granting a nationwide preliminary injunction.
- Dec. 5, 2024 — The U.S. Department of Justice, on behalf of the Department of Treasury, files an appeal and seeks a stay of the preliminary injunction pending appeal.
- Dec. 23, 2024 — A motions panel judge of the U.S. Court of Appeals for the Fifth Circuit grants the government’s emergency motion for a stay pending appeal, effectively reinstating enforcement of the reporting requirements.
- Dec. 26, 2024 — A separate Fifth Circuit merits panel vacates the Dec. 23 order, which reinstates the nationwide injunction blocking enforcement related to BOI reporting.
- Dec. 27, 2024 — The Fifth Circuit announces an expedited briefing schedule. Plaintiffs have until the end of February to submit briefs. The case is scheduled for oral arguments on March 25.
- Dec. 31, 2024 — The U.S. Department of Justice, on behalf of the Department of Treasury, petitions the U.S. Supreme Court seeking a stay of the injunction pending the ongoing appeal. (As of the date of this post, the Supreme Court has yet to act.)
Rob Smith, senior attorney of the Small Business Legal Center for the NFIB, has called the appeals court’s reinstatement of the injunction “a welcome sigh of relief for small businesses.”
These businesses “have experienced enormous chaos and confusion,” Smith continued. “Thankfully, the court’s latest decision recognizes that the CTA and BOI reporting requirements pose serious constitutional questions. It also provides Main Streets across the country with a reprieve from this harmful mandate while our lawsuit proceeds.”
Have a question or comment? E-mail our editor Bruce Beggs at [email protected].