Bloomberg Tax reported that the Corporate Transparency Act and its implementing regulations, which mandate U.S. business entities report to the Treasury Department stakeholder information, were preliminarily blocked nationwide by a Texas federal court on Dec. 3.
The court ruled that this nationwide injunction applies to the CTA’s enforcement and its imminent Jan. 1, 2025 filing deadline. According to The National Law Review, since this is only a preliminary injunction, it warned reporting firms to be vigilant about additional updates and proceedings in this as well as other cases that could amend or change this order.
At the request of Texas Top Cop Shop, Judge Amos L. Mazzant III of the U.S. District Court for the Eastern District of Texas issued the injunction. The police equipment store is among other co-plaintiff businesses and the Libertarian Party of Mississippi. According to Bloomberg Tax, the lawsuits said that the CTA is not within Congress’s purview to regulate interstate and foreign commerce since it regulates incorporated entities regardless of whether they engage in commercial activity.
Under the CTA, roughly 32.6 million existing business entities disclosed their beneficial owners to the Treasury Department’s Financial Crimes Enforcement Network prior to 2025. The government stated that the law's function—to regulate anonymous shell companies and prevent money laundering, terrorism financing, and other illicit economic activity—is within Congress’s regulatory duties, Bloomberg Tax reported.
However, the court’s opinion noted that the CTA still did not pass muster, despite the fact that Congress can regulate anonymous corporate operations. This is due to the Constitution’s Commerce Clause that cannot be utilized to force the disclosure of information for law enforcement reasons, Bloomberg Tax reported.
According to Journal of Accountancy, the Financial Crimes Enforcement Network, responsible for enforcing the CTA, is in the process of reviewing the order, a spokesperson stated on Dec. 4, noting that other courts have previously denied similar requests. Meanwhile, the Journal also reported that the Department of Justice (DOJ) filed a notice of appeal on the night of Dec. 5.
On Dec. 6, the AICPA released a statement from Melanie Lauridsen, vice president of Tax Policy & Advocacy for the AICPA, acknowledging that business owners have been anxious and confused about the BOI reporting requirement and reminded CPAs assisting clients with BOI report filings to continue to gather the necessary information from their clients and prepare to file the BOI report if the injunction is lifted.
“While we do not know how the Fifth Circuit court will respond, the AICPA continues to advise members that, at a minimum, those assisting clients with BOI report filings continue to gather the required information from their clients and are prepared to file the BOI report if the injunction is lifted," Lauridsen noted.
“The AICPA realizes that there is a lot of confusion and anxiety that business owners have struggled with regarding the BOI reporting requirement and we, together with our partners at the State CPA Societies, have continued to advocate for a delay in the implementation of this requirement," Lauridsen stated. "The AICPA will continue an open dialogue with FinCEN in the hopes that our questions and concerns will be addressed. In the meantime, we advise those filing to be prepared in the event there is a stay or reversal of the injunction.”
Bloomberg Tax reports that representing the plaintiffs are S|L Law PLLC and the Center for Individual Rights.