UPDATE: Corporate Transparency Act Unconstitutional

What’s Going On?

Jeff Watson has been keeping us updated on all these whiplash changes over the past month or so. He is hosting a FREE Facebook Steam on his page on Friday, January 3rd at 11 AM Central to discuss what’s really going on with CTA and how it affects Business Owners. If you are on Facbook, you can tune in at 11 am Friday on the Jeff Watson Invested Facebook Page

Contact your Representative:

  The CTA is something we will have to closely monitor throughout the early part of this year to make sure any new changes are quickly recognized and handled. It is my hope that the House of Representatives will come to order, elect Mike Johnson as Speaker, and then, as one of the first things done in the Financial Services Committee (to be led by Congressman French Hill), they will introduce and pass legislation that repeals or modifies the CTA.

        What can you do to make sure that happens, and what should you do if you already complied with the CTA and filed your BOI information? Go to https://www.house.gov/representatives/find-your-representative and enter your zip code. Here is some sample language you can use:

“What will happen to the personal identifying data collected by FinCEN under the CTA? It seems likely that Congress will repeal the Corporate Transparency Act, particularly in light of the fact that multiple Federal Courts have declared that the CTA is unconstitutional. One court ordered a preliminary injunction on filing reports under the CTA. I urge you to support the efforts to repeal this legislation. Thank you for your attention to this matter.”

Update on Corporate Transparency Act as of December 27th, 2024 at Noon – they Vacated the Stay against the Injunction

CTA Whiplash Continues – the court decision and injunction from the 3rd, that was stayed on the 23rd, has been reversed yet again as of now, this could change later today, who knows.

Here’s our Update from Jeff Watson:

Let me quote from the decision that came out last evening (a copy of which is attached at the bottom of this email):

“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.”

        What does this mean? It means that the full panel of the 5th Circuit Court of Appeals has reversed what a lesser panel of that court has done. The original trial court decision granting an injunction against the enforcement of the CTA and having to file the beneficial ownership information (BOI) reports has been reinstated.

        In the last three weeks, we have seen four significant changes made regarding the enforcement of the CTA. First, the trial court ruled it was unconstitutional and granted an injunction. Next, an appeals panel stayed the injunction. Then, FinCEN issued a 12-day extension for most reporting entities. Now, the full panel of that court has stayed the order vacating the injunction, meaning the injunction is still in place. “You need to report…no, you don’t need to report now…wait, sorry, you do need to report again…hold on, no, we are going to keep it at no, you don’t need to report for now!” Do you have whiplash yet??

        You can choose to voluntarily report if you want. For others, you may choose not to report, as we are hoping this injunction will be in place long enough to allow Congress to correct this problem. 

        The bottom line for now is that the injunction stands, and you are NOT REQUIRED TO REPORT AT THIS TIME!

See the video from Jeff below:

Update on BIOR filing with FinCEN as of December 23rd, 2024

The injunction against the Corporate Transparency Act has been stayed, which means the requirements to file Beneficial Ownership Information Reports (BOIR) with FinCEN are back on. They did put an extension in place to January 13 for companies created prior to January 1, 2024. Created after September 4, 2024, you also have until January 13th. Companies created after December 3rd and before December 23rd have a 21 day extension

Here’s an announcement from Jeff Watson:

Link to File https://boiefiling.fincen.gov/fileboir

We have read that they are appealing the appeal of the injunction, so this information could change again before January 13th.

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What should YOU do, these are the facts as we know them, but should you file or not file in light of the injunction, you should consult with YOUR Attorney. The one you pay to be your attorney.

Update December 13, 2024 from Jeff Watson

For the last week and a half, unless you have not been paying attention, you’ve probably heard that a Federal District Court in Texas granted a preliminary injunction on December 3rd against the Secretary of the Treasury and the Financial Crimes Enforcement Network (FinCEN) which suspended the requirement that business owners file Beneficial Ownership Interest (BOI) reports with FinCEN as required under the Corporate Transparency Act (CTA).

        The Court has determined that the CTA is in all likelihood unconstitutional. Two days after the judge entered this decision, it was appealed by the Department of Justice on behalf of the Treasury and FinCEN. As of the date of this writing, there has not been a ruling on the appeal. This means the Fifth Circuit Court of Appeals has had more than a week to consider the appeal and the application of a nationwide preliminary injunction (ban) on the filing of BOI reports under the CTA. The longer this injunction remains in place given the time of year and the deadlines in the CTA, the more likely the injunction will remain in place.

        To recap what happened, the National Federation of Independent Business (NFIB) and other businesses came together in a case captioned Texas Top Cop Shop Inc., et al. v. Garland, et al. The Court determined that a collection of Plaintiffs should have their cases consolidated. The judge determined that the CTA was a violation of the United States Constitution, particularly the 10th Amendment, because it interfered with how various states would regulate the formation and operation of businesses under their own jurisdictions.

        Since this decision came out, FinCEN has been engaged in a massive PR campaign to make it seem as if the law is still valid and people can still voluntarily file if they choose to do so. I recommend that you consult with your attorney about not filing if you value your privacy. At this point, we do not know what will happen with the information that has already been submitted in the likely event that the CTA is deemed unconstitutional or is otherwise removed by Congress.

        The CTA came out of the House Financial Services Committee when it was chaired by Maxine Waters. Whether the incoming chairman of that committee is Andy Barr of Kentucky or French Hill of Arkansas, both have indicated that if it were up to them, the law would be reversed and removed. They will still have to deal, however, with the issue of what the government will do with all the data it has collected.

        This is where you have the opportunity to engage in political advocacy. You can reach out to your member of Congress using the simple email system Congress has in place. Go to https://www.house.gov/representatives/find-your-representative and enter your zip code. The message I sent to my representative was:

“What will happen to the personal identifying data collected by FinCEN under the CTA? It seems likely that Congress will repeal the Corporate Transparency Act. Additionally, there are multiple Federal Court rulings stating that the CTA is unconstitutional. One court ordered a preliminary injunction on filing reports under the CTA. Thank you for your attention to this matter.”

        I urge you to reach out now so that your member of Congress knows that this is an important issue.

Update December 10th from Attorney Lee Phillips

I keep getting asked what should be done if you have already registered for FinCEN. The Texas federal court put FinCEN on hold with an injunction last week. Right now, the December 31st registration deadline is on hold.

It is possible that a court will lift the injunction, so stay on the edge of your seat.

If you already registered, don’t sweat it. The information you gave them was stuff they already had, you just put in a little package for them.

There isn’t any way to “unregister” or remove your information. In fact, it isn’t possible to tell them you have killed the company and won’t be maintaining your information. In theory, you have to keep maintaining your information or you are in violation of the FinCEN regulations.

Have you reported to FinCEN who owns or controls your companies? We’ve been being told to hold off, that some last minute court decision could make this unnecessary.

Well, that last minute thing did happen:

From John Hyre: “I’m Not Filing Corporate Transparency Act Reports”

A heads up for those wondering about the CTA Reports: The Corporate Transparency Act was enjoined by a Texas Federal District Court. It’s a nationwide injunction, subject to a final ruling, appeals, and the Trump administration possibly overturning the enabling regulation (the Democrats are unlikely to agree to overturn the statute itself). I shall not file if & until those hurdles are cleared. Special thanks to Sean King and Jeff Watson for their more detailed take on the matter, they got me up to speed quick-quick.

From Jeff Watson: “BREAKING NEWS: Corporate Transparency Act Is Unconstitutional!”

On December 3, 2024, a federal judge for the U.S. District Court for the Eastern District of Texas (Sherman Division) issued a nationwide preliminary injunction against the enforcement of the Corporate Transparency Act (CTA). A federal judge has the authority to determine if a law passed by Congress is unconstitutional, meaning it exceeds the scope of authority given to Congress as to regulating things that happen inside a state.

In addition to determining that the law is unconstitutional, the judge granted a preliminary injunction, which means he stopped the requirement for people to file their beneficial ownership interest reports under the CTA.

If you remember, I told you in a recent email on this topic that I was waiting until after the election and after the week of December 9th to file the information for my entities because I was hoping we would see a federal judge with the courage to declare the CTA unconstitutional and issue an order like this, and that is precisely what happened on December 3rd in Texas.

In a 79-page decision, this judge determined that Congress does not have the authority to pass such legislation influencing how states regulate and allow the operation of businesses. He went on to say that the decision applied to all businesses in the United States, and that the entire process must stop.

If you have not yet filed under the CTA, there is no need to do so. The court did not address what will happen with the information already filed by those who reported. I know that I had to report for one entity already because of the timelines. I suspect that after January 20, 2025, when we have a new Attorney General of the United States, the Department of Justice will receive different instructions as to how to move forward with these cases. I expect the CTA to eventually go away completely.

 If there are any new details regarding this, I will let you know, but for now, the good news is you do not have to file under the CTA!