FinCEN BOI Requirement Ruled Unconstitutional
The Corporate Transparency Act, which required LLCs or corporations to file BOI reports to FinCEN, was ruled unconstitutional by a federal district court in Texas. The case was Texas Top Cop Shop, Inc. V. Garland, and the Court ruled that the federal government does not have the constitutional authority to regulate LLCs and corporations, which are adopted and created under state laws. The BOI report was a new federal filing requirement for LLCs and corporations and required all existing and new entities to disclose anyone who had 25% or more ownership or who had substantial control over the entity.
The impact of this ruling is significant as the Court held that the BOI filing requirement was unconstitutional on its face. This means it is unconstitutional for everyone. This ruling is significant as prior courts (e.g. Alabama federal court) have ruled that the BOI filing requirement is unconstitutional but only as applied to plaintiffs in that case. In addition, the judge issued a nationwide injunction against FinCEN and the Department of Treasury from enforcing the law. This means LLC and corporation owners do not have to file a BOI report.
FAQs
What happens next?
The federal government could appeal the ruling to the 5th Circuit Federal Court of Appeals. FinCEN, the Dept of Justice, and Treasury have not issued a response or press release and FinCEN is still accepting BOI filings on their site.
What if I already filed a BOI?
There is nothing to do now but you will not need to amend or update any filings if the company changes. The filings already made are private and not publicly available.
Where did President Elect Trump stand on this issue and will that influence any appeal?
President Trump vetoed original legislation that included the corporate transparency act back in 2020. This legislation had numerous bills within it including defense spending bills and was a total legislative package called the National Defense Authorization Act of 2021. President Trump’s statement at the time did not mention the corporate transparency act but instead mentioned defense spending. His veto was overridden by Congress though and the Act became law. It is likely that a Trump Justice Department and Department of Treasury will not pursue an appeal of the Texas ruling and may withdraw any efforts the Biden administration may make to overturn the ruling in Texas Top Cop Shop, Inc.
Should I still file my BOI by December 31, 2024 out of an abundance of caution?
You should consult your own legal counsel but as the law stands now, it is unconstitutional, and the requirement cannot be enforced against you. Also, FinCEN has been ordered to stop enforcing the law and presumably won’t even be able to collect BOIs. At this time, they are still collecting them at fincen.gov/boi but its unclear for how long they will do so.
