NEW ORLEANS — A federal appeals court on Thursday reinstated a nationwide freeze on small-business reporting requirements under the Corporate Transparency Act (CTA), reversing a decision issued Monday that had briefly allowed enforcement to resume.
The Fifth Circuit Court of Appeals’ latest ruling blocks the beneficial ownership information (BOI) reporting mandate while it considers the government's appeal.
“The court’s reinstatement of the nationwide injunction is a welcome sigh of relief for small businesses,” says Rob Smith, senior attorney of the National Federation of Independent Business (NFIB) Small Business Legal Center. “Since being told earlier this week that they must urgently submit their BOI reports, our nation’s small businesses have experienced enormous chaos and confusion. 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.”
The law requires most companies, including dry cleaners, to file ownership information with the Financial Crimes Enforcement Network (FinCEN). Reports would be mandatory for anyone exercising substantial control or owning at least 25% of a reporting company. The deadline had shifted from Jan. 1, 2025, to Jan. 13 during this week's brief reinstatement.
Affected businesses include all corporations and LLCs, plus any entity created through Secretary of State filings. The requirement’s aim is to combat money laundering and financial crimes, according to FinCEN.
The legal challenge began when NFIB, along with small businesses and non-profits, sued over the requirements. Judge Amos Mazzant of the U.S. District Court for the Eastern District of Texas issued the original injunction on Dec. 3 in Texas Top Cop Shop v Garland et al. On Dec. 23, the Fifth Circuit Court of Appeals reinstated the enforcement.
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