For the Main Street business community, it looks like Christmas has come early. With less than a month to go before the Corporate Transparency Act’s year-end filing deadline, a federal court today issued a nationwide injunction that halts enforcement of the new reporting regime. It’s a massive win for the more than 33 million businesses who are currently subject to the onerous disclosure rules, many of which had no idea they could be starting the new year as de facto felons.
That positive outcome was secured by our good friends at the National Federation of Independent Business who, alongside several of their small business members, filed their constitutional challenge back in May.
As S-Corp readers are well aware, the CTA took effect this year and requires small businesses and other covered entities to report – and regularly update – the personal information of their owners and managers to the Financial Crimes Enforcement Network (FinCEN) at the Treasury Department. Put simply, the CTA is the largest data grab in history outside the Tax Code, and saddles law-abiding business owners with compliance headaches and criminal penalties while doing little or nothing to combat illicit activity.
S-Corp and its allies have been fighting the CTA for years, including calling out the ill-conceived law back in 2020, backing the legal efforts kicked off by the National Small Business Association (NSBA), organizing numerous industry support letters to push for delay and repeal in Congress, and otherwise educating lawmakers and various other stakeholders along the way.
Back to the Texas court ruling, the key passage reads as follows:
Having determined that Plaintiffs have carried their burden, the Court GRANTS Plaintiff’s Motion for a Preliminary Injunction. Therefore, the CTA, 31 U.S.C. § 5336 is hereby enjoined. Enforcement of the Reporting Rule, 31 C.F.R. 1010.380 is also hereby enjoined, and the compliance deadline is stayed under § 705 of the APA. Neither may be enforced, and reporting companies need not comply with the CTA’s January 1, 2025, BOI reporting deadline pending further order of the Court.
And here’s NFIB’s press release applauding the decision:
“This ruling is a huge victory for small businesses nationwide, and just in time” said Beth Milito, Executive Director of NFIB’s Small Business Legal Center. “For many Main Street small businesses, they were a mere four weeks away from the deadline to file their information in accordance with the CTA. The BOI reporting requirements are a harmful invasion of small business owners’ privacy and a misuse of their valuable time. Thankfully, the Court agreed and granted a preliminary injunction, giving small business owners a reprieve from this burdensome rule.”
The big question here is how FinCEN will respond. The agency pressed forward with enforcement even after a successful ruling in NSBA v Yellen and ultimately appealed the decision, which remains pending in the 11th Circuit. So while affected entities are off the hook for the year-end filing deadline, that’s all subject to change as the case moves through the courts – meaning we’ll still need to work with Congress and the new administration on a permanent fix.
That said, today’s ruling is a huge win for Main Street and comes as welcome relief to countless businesses across the country.
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The Lander Chamber of Commerce subscribes to S-Corp’s “Washington Wire” and occasionally shares news items with Lander Chamber members.
