Published December 5, 2024

On December 3^rd, United States District Court for the Eastern District of Texas issued a nationwide preliminary injunction in favor of the plaintiffs, Texas Top Cop Shop, Inc., et al. v. Garland, et al, which states that reporting companies need not comply with the CTA’s January 1, 2025 Beneficial Owner Information “BOI” reporting deadline pending further order of the Court. The Court didn’t rule on the constitutionality of the CTA, but did state the CTA is likely unconstitutionally outside of Congress’s power.

In deciding for the plaintiffs, the Court found that the CTA was not authorized under the Commerce Clause of the U.S. Constitution, ruling that “[u]pholding the CTA would require the Court to rubber-stamp what appears to be a substantial expansion of commerce power. This, the Court will not do.” The Court also ruled that the CTA was not authorized under the Constitution’s Necessary and Proper Clause, holding that “[t]here is simply no enumerated power the Government can identify that would justify the CTA . . . .”

The Court blocked the CTA statutory provisions (31 U.S.C § 5336) and the implementing regulation (31 C.F.R §1010.380).  We are expecting the government to appeal the ruling and are awaiting further guidance from FINCEN. The outcome of the potential appeal is unknown at this time as well.

Although you are not legally required to report, some business owners may decide to voluntary file their BOI report before the end of the year. The reason for this is that if the preliminary injunction is lifted, we are unsure on how long companies will have to comply with the reporting requirements.

Filing the BOI report for your business(s) now may mitigate a potential personal time bind, if the deadline is set for an inopportune time to file the report. If the Act is deemed unconstitutional, we presume the information collected by FINCEN will be destroyed as it was improperly collected.

Please consider all of these factors before deciding between filing your business(s) BOI report, not filing your business(s) BOI report, or preparing your business(s) BOI report, but not filing. Also, if you already filed your BOI report there is nothing to do at this time, and nothing to reverse that reporting.

We are monitoring the situation and any updates will be posted on our website.

Please contact your Polk & Associates representative if you have any questions.

Polk & Associates

Large enough to serve a diverse clientele, yet small enough to maintain a hands-on approach, we are committed to maintaining the highest accounting and ethical standards with continuous education, extensive research resources, and excellent quality control.

Polk and Associates is a member of the Michigan Association of Certified Public Accountants, and the American Institute of Certified Public Accountants. The firm participates in the AICPA Peer Review Program, and has always received the highest level of award for its audit practice and quality control.