By Richard S. Ekimoto, Esq.

Although the U.S. Supreme Court issued an emergency stay of the CTA injunction in the Texas Top Cop, Inc. v. McHenry case (formerly Texas Top Cop, Inc. v. Garland), FinCen is currently enjoined from enforcing the CTA because of a second injunction in the Smith v. U.S. Department of the Treasury case. FinCen has now appealed the second injunction. However, FinCen’s motion included the following:

If this Court grants the stay, FinCEN intends to announce that it will extend the compliance deadline for thirty days. During that period, FinCEN will assess whether it is appropriate to modify the CTA’s reporting requirements to alleviate the burden on low-risk entities while prioritizing enforcement to address the most significant risks to U.S. national security.

Since the U.S. Supreme Court has already ruled on the substance of the motion, it is likely that the stay will issue. However, FinCen indicated that it will allow reporting companies at least thirty days to file their BOI Reports. More importantly, FinCen has indicated that it is considering changing its approach to BOI Reports and will be evaluating whether “low-risk entities” need to file BOI Reports.

Of interest to community associations is that the Community Associations Institute met with FinCen last year asking that community associations be exempt from Reporting Companies because they are low-risk entities. FinCen, at the time, rejected that approach. It appears that FinCen is now reconsidering whether low-risk entities are required to file BOI Reports.

Community associations that have not filed their BOI Report might hold off on filing until FinCen makes its determination about low-risk entities.

By Richard S. Ekimoto, Esq.

Today, the U.S. Supreme Court issued a stay of the injunction prohibiting the enforcement of the CTA pending the disposition of the appeal before the 5th Circuit Court of Appeals and any further proceedings in the U.S. Supreme Court, if any. The decision was apparently a 8-1 decision with Justice Gorsuch concurring and Justice Jackson dissenting. The stay means that reporting companies without an exemption will need to file a BOI Report with FinCen. Although FinCen has not issued any guidance, it is anticipated that they will provide a period of time for reporting companies to file their BOI Report. The last time, the injunction was stayed, FinCen provided three weeks for reporting companies to file a BOI Report.

As a result, incorporated associations without an exemption should proceed to file their BOI Report as soon as possible. Unincorporated associations should consult with their legal counsel whether they are required to file a BOI Report. Board members that do not wish to provide their association with their Beneficial Owner Information can submit their information directly to FinCen on its website and provide their FinCen ID Number to their association for the association’s BOI Report.

January 23, 2025 10:20 a.m. HST Update: The link to the U.S. Supreme Court order is added above. At the time of the original post, only a summary of the order was available on the U.S. Supreme Court website. Having now read the formal order, we can provide additional information about the dissent and concurrence. Justice Gorsuch concurred with the order but said that he would have granted the U.S. Government’s request for the U.S. Supreme Court to immediately address whether the U.S. District Court in Texas had that authority to issue a universal injunction (rather than one only for the benefit of the plaintiffs in the case). Justice Jackson dissented, stating, “However likely the Government’s success on the merits may be, in my view, emergency relief is not appropriate because the [Government] has failed to demonstrate sufficient exigency to justify our intervention.” Justice Jackson’s reasoning was that the 5th Circuit Court expedited its appeal of the case and FinCen had delayed the implementation of the CTA by almost four years after Congress enacted the law.

January 24, 2025 Update: FinCen updated their website to address the U.S. Supreme Court order and has stated that filing BOI Reports by reporting companies remains voluntary. It states in part:

As a separate nationwide order issued by a different federal judge in Texas (Smith v. U.S. Department of the Treasury) still remains in place, reporting companies are not currently required to file beneficial ownership information with FinCEN despite the Supreme Court’s action in Texas Top Cop Shop. Reporting companies also are not subject to liability if they fail to file this information while the Smith order remains in force. However, reporting companies may continue to voluntarily submit beneficial ownership information reports.

Since the U.S. Supreme Court has already ruled on the identical question about whether a stay is appropriate, we anticipate that the separate Smith order will also be stayed eventually or possibly withdrawn. Incorporated associations without an exemption should probably take this time to voluntarily file its BOI Report since it is unclear how long FinCen will provide reporting companies to file BOI Reports after the Smith order is stayed or withdrawn. Unincorporated associations should confer with their attorneys.

by Richard S. Ekimoto, Esq.

Several hours ago, the 5th Circuit Court of Appeals has issued a stay of the nationwide injunction issued by the Federal District Court in Texas pending appeal. The stay was issued by a two-to-one vote of the three-judge panel of the 5th Circuit Court of Appeals. As a result, incorporated community associations and other reporting companies will be required to file their BOI Report unless they fall within one of the CTA exemptions. It is unclear at this time whether FinCen will provide additional time to file BOI Reports. The FinCen website still states that the filing of a BOI Report is voluntary. It is also possible for the plaintiffs in the case to seek a further review by the whole 5th Circuit Court of Appeals or from the U.S. Supreme Court. The 5th Circuit Court decision does not impact the stay in place for the plaintiffs in a related case arising out of the Federal District Court in Alabama.

December 23, 2024 Update: FinCen has posted on its website that it is extending the deadline to file BOI Reports as follows:

• Reporting companies that were created or registered prior to January 1, 2024 have until January 13, 2025 to file their initial BOI Report.
• Reporting companies created or registered in the United States on or after September 4, 2024 that had a filing deadline between December 3, 2024 and December 23, 2024 have until January 13, 2025 to file their initial BOI Report.
• Reporting companies created or registered in the United States on or after December 3, 2024 and on or before December 23, 2024 have an additional 21 days from their original filing deadline to file their initial BOI Report.
• Reporting companies that qualify for disaster relief may have extended deadlines that fall beyond January 13, 2025.
• Reporting companies that are created or registered in the United States on or after January 1, 2025 have 30 days to file their initial beneficial ownership information reports with FinCEN after receiving actual or public notice that their creation or registration is effective.

December 27, 2024 Update: Yesterday, the 5th Circuit Court of Appeals reversed itself and set aside its own stay of the Federal District Court injunction of the CTA. What this means is that reporting companies are not required to file pending the appeal of the case. The 5th Circuit Court of Appeals stated:

The merits panel now has the appeal, which remains expedited, and a briefing schedule will issue forthwith. However, in order to preserve the constitutional status quo while the merits panel considers the parties’ weighty substantive arguments, that part of the motions-panel order granting the Government’s motion to stay the district court’s preliminary injunction enjoining enforcement of the CTA and the Reporting Rule is VACATED.

Those incorporated associations that have not filed their BOI Report can wait until the appeal is decided before filing. We will provide additional information as it arises.

January 2, 2025 Update: On New Year’s Eve, FinCen filed for an emergency stay of the injunction with the U.S. Supreme Court. If granted, the injunction prohibiting FinCen from enforcing the CTA would be lifted and reporting companies would be required to file their BOI Report unless they qualify for an exception. In addition to arguing that the CTA is constitutional, FinCen also argues that if the injunction is to remain in place, it should only apply to the plaintiffs in the Texas Federal District Court case. At this point, incorporated associations without an exemption should monitor the situation since it is not obligated to file a BOI Report. Even if the U.S. Supreme Court stays the injunction, it is likely that FinCen will allow reporting companies additional time to file their BOI Report as it did after the 5th Circuit Court of Appeals temporarily stayed the injunction. Incorporated associations without an exemption, however, should have the information it needs ready to file a BOI Report in the event that the U.S. Supreme Court rules in the government’s favor.

January 3, 2025 Update: Justice Alito has ordered that the Plaintiffs have until 4:00 pm on January 10, 2025 to file a response to FinCen’s filing seeking a stay of the injunction. Either Justice Alito or the U.S. Supreme Court could rule on FinCen’s filing sometime after the January 10, 2025 filing deadline.

by Richard S. Ekimoto, Esq.

I recently included a short post about the Federal District Court order halting enforcement of the CTA. The Federal District Court Order granted a Nationwide injunction blocked the enforcement of the CTA reporting requirement stating that “reporting companies need not comply with the CTA’s January 1, 2025, BOI reporting deadline pending further order of the Court.”

Since my post, FinCen filed a notice of appeal to the Fifth Circuit Court of Appeals. In addition, FinCen finally posted a notice on its website addressing the injunction. FinCen stated:

While this litigation is ongoing, FinCEN will comply with the order issued by the U.S. District Court for the Eastern District of Texas for as long as it remains in effect. Therefore, reporting companies are not currently required to file their beneficial ownership information with FinCEN and will not be subject to liability if they fail to do so while the preliminary injunction remains in effect. Nevertheless, reporting companies may continue to voluntarily submit beneficial ownership information reports.

The website did not address whether FinCen will be seeking an order from the 5th Circuit Court of Appeals to stay the Federal District Court Order. If a stay of the Federal District Court Order is granted, reporting companies could again be required to file their BOI Report. As a result, incorporated associations should have the information for their BOI Reporting available so it can file if necessary. While FinCen will accept voluntary BOI Reports at this time, it probably doesn’t make sense to file unless the Federal District Court Order is stayed or overturned.

December 14, 2024 Update: FinCen has filed a motion with the Federal District Court in the Eastern District of Texas, seeking a immediate stay of the nationwide injunction of the CTA. If the stay is granted, reporting companies would be required to file their BOI report while FinCen’s appeal is heard. The Federal District Court issued an order on December 12, 2024, giving the plaintiffs until noon on Monday, December 16, 2024 to respond to FinCen’s motion. FinCen has said that they will seek a stay with the 5th Circuit Court of Appeals if the Federal District Court didn’t grant the stay by December 13, 2024. It is unclear whether FinCen will file a motion with the 5th Circuit Court of Appeals or wait until the Federal District Court considers the filing by the plaintiffs. At this point, incorporated associations should continue to monitor the situation before filing a BOI report.

December 16, 2024 Update: FinCen also filed an emergency motion in the 5th Circuit Court of Appeals to stay the Federal District Court order granting a nationwide injunction of the CTA pending appeal. The 5th Circuit has provided the plaintiffs until 5:00 pm on December 17, 2024 to respond to the Federal Government’s motion. The Federal Government will have until noon on December 19, 2024 to file a reply brief. That probably means that the Federal District Court order enjoining enforcement of the CTA will remain in effect until at least December 20, 2024. Even if a stay pending appeal is granted by the 5th Circuit, it seems likely that there would be a grace period for reporting companies to file a BOI report due to the injunction. If the 5th Circuit Court of Appeals denies the emergency motion, FinCen could seek further review by the U.S. Supreme Court. Incorporated associations should continue to monitor the situation before filing a BOI report.

December 18, 2024 Update: Yesterday, Congressional leaders unveiled a Continuing Resolution spending bill to fund the government through March 14, 2025. This bill is necessary to avoid a government shut-down on Friday, December 20, 2024. A number of provisions are included in the Continuing Resolution including a provision that would extend the CTA deadline for one year. It appears likely that the Continuing Resolution will pass by the Friday deadline. Community associations that have not filed their BOI Report should continue to hold-off of filing and monitor the situation.

December 19, 2024 Update: Yesterday, after Congressional leaders unveiled the Continuing Resolution that would have extended the deadline for filing a BOI Report to January 1, 2026, Donald Trump came out in opposition to the legislation. Donald Trump apparently did not oppose the extension of the BOI Reporting deadline, but the spending provisions and the lack of an extension of the debt ceiling. As a result, Republican legislators sought approval for a alternative Continuing Resolution to avoid a governmental shut-down that will occur after Friday, December 20, 2024 if no legislation is passed. The alternative Continuing Resolution did not include a provision to extend the BOI Reporting deadline because it was a substantially slimmed down bill. The alternative Continuing Resolution was voted down in the U.S. House of Representatives by a vote of 174-235 with one abstention. The U.S. House of Representatives have not announced its plans to avoid a governmental shutdown after tomorrow. One possibility is for the House to consider the original Continuing Resolution which includes the extension of the BOI Reporting deadline. It is unclear what impact a governmental shutdown would have on the filing and enforcement of the CTA even if the BOI Reporting requirement were in place. The nationwide injunction of the CTA remains in place, although the 5th Circuit Court of Appeals is considering a governmental request to stay the injunction pending the appeal. Community associations, particularly unincorporated associations that have not filed their BOI Report should continue to hold-off of filing and monitor the situation.

December 20, 2024 Update: The U.S. House of Representatives just passed a Continuing Resolution that will hopefully avoid a governmental shutdown by a vote of 366-34-1. The vote did not include an extension of the BOI Reporting deadline nor an extension of the debt ceiling. The bill will proceed to the U.S. Senate and if passed, will go to President Biden who indicated support for the bill. At this point, the 5th Circuit Court of Appeals has indicated that it will decide the government’s emergency motion to stay the CTA injunction pending appeal by Friday, December 27, 2024. In addition, there is a pending 11th Circuit Court of Appeal of the Alabama Federal District Court ruling that the CTA is unconstitutional. It is possible that the 11th Circuit Court of Appeals could also address the BOI Report deadline for reporting companies beyond those covered by the Alabama ruling. The 4th Circuit Court of Appeals is also considering the Community Associations Institute’s challenge to the CTA. Community associations should continue to monitor the situation. Incorporated associations that are not subject to an exemption might consider having the information it needs to file its BOI Report on hand if the injunction is lifted.

December 23, 2024 Update: 5^th Circuit stayed the nationwide injunction and the CTA deadline is back on for now. 

By Richard S. Ekimoto, Esq

Bloomberg Law has reported a few hours ago that a federal District Court judge in Texas issued a nationwide injunction on the Corporate Transparency Act (“CTA”). The injunction means that the CTA is blocked from being enforced. Judge Amos Mazzant III issued the injunction stating:

The CTA is likely unconstitutional as outside of Congress’s power. Because the Reporting Rule implements the CTA, it is likely unconstitutional for the same reasons.

The Judge’s order blocked the enforcement of the reporting requirement and “reporting companies need not comply with the CTA’s January 1, 2025, BOI reporting deadline pending further order of the Court.” As a result, community associations that have not filed their BOI Report should not do so at this time. There is no word currently whether FinCen will appeal the decision.