In a win for ABC and its members, on Dec. 26, a 5th Circuit Court panel reinstated the nationwide injunction against the Corporate Transparency Act’s beneficial ownership information reporting requirement.

On Dec. 3, a federal judge in the U.S. District Court for the Eastern District of Texas issued the nationwide preliminary injunction against enforcement of the BOI reporting requirements, but upon appeal by the government, the 5th Circuit Court granted a stay on the injunction. The reinstatement of the injunction provides small businesses with necessary relief while litigation continues.

The same panel announced that it would hear arguments on March 25 on whether to keep the injunction in place while the case is heard by the full court, guaranteeing that the injunction will remain in place through at least the end of March 2025. As a result, covered entities do not need to file their beneficial ownership information reports prior to that proceeding.

“A nationwide injunction of the CTA’s reporting requirements will allow small business contractors to breathe easy as we await a decision from the court,” said Kristen Swearingen, ABC vice president of legislative & political affairs. “The CTA’s onerous reporting requirements would impact small business operations, forcing companies to dedicate time and resources to comply or risk lofty penalties. ABC applauds the decision by the 5th Circuit Court panel and urges the court to keep the injunction in place and side with the small business community when delivering its final decision.”

Background on the Corporate Transparency Act

On Jan. 1, 2021, Congress enacted into law the Corporate Transparency Act, which establishes a new framework for the reporting, maintenance and disclosure of beneficial ownership information in order to better enable critical national security, intelligence and law enforcement efforts to counter money laundering, the financing of terrorism and other illicit activity.

ABC, along with a coalition of small business organizations, submitted a letter to congressional leadership expressing concerns on the amendments incorporating the CTA into the 2021 National Defense Authorization Act, stating the enactment of the CTA would decrease privacy protections and slow the economic recovery of Main Street businesses.

ABC responded to Treasury’s Financial Crimes Enforcement Network notice of proposed rulemaking seeking public input on how best to implement the reporting requirements of the CTA, as well as the CTA’s provisions regarding FinCEN’s maintenance and disclosure of reported information in comments. ABC’s comments noted that the framework prescribed by the CTA will require millions of small businesses, including nearly every employer with 20 or fewer employees, to report to FinCEN certain personal information of their beneficial owners and update that information periodically throughout the life of the business.

ABC also argued that America’s small businesses—which make up most of ABC’s members—are typically not staffed or equipped to understand and comply with reporting obligations similar to those under the CTA. However, per the CTA, failure to comply can result in significant fines and imprisonment for these small business owners.