December 3, 2024
If you are one of the millions of business owner in the United States – at least for now – you’re off the hook.
Off the hook for what… you ask? Remember that beneficial ownership information or BOI requirement that you were legally obligated to file before January 1, 2025? Yeah – late tonight a federal judge in Texas issued a nationwide preliminary injunction saying – no at least for now — you don’t have to file it.
Judge Amos Mazzant issued this 79 page ruling tonight writing, “congress’s commerce power cannot reach this far. If the court were to sanction such an extension of legislative power today, then there is no telling how congress would control companies tomorrow.”
The Department of Justice has not yet issued a response to tonight’s ruling nor has FinCEN canceled the January 1st reporting deadline for business owners…but they will obviously be complying with the judge’s order. I will let you know when they make the formal announcement.
So let me just back up for a second in case you’re confused about what I’m talking about. You may remember I did a series of videos at the beginning of this year about this new BOI requirement from the financial crimes enforcement network or fin cen. This requirement is a result of a law passed by both democrats and republicans in 2021 called the corporate transparency act. That law created this beneficial ownership information – or BOI requirement to help the us government track down people who are trying to hide or benefit from shell companies or other opaque business ownership structures. The regulation was meant to catch criminal organizations using their businesses to launder money, finance terrorism operations and other crimes. But it also required almost every type of LLC, C-Corp, S-Corp, to enter all kinds of identifying information to the federal government so they can know who directly or indirectly owns or controls a company.
As you can imagine – lots of business owners sued. Back march a federal judge in Alabama issued a narrow preliminary injunction saying only that specific group of plaintiffs who filed that lawsuit were exempt from filing a BOI while the case played out – ps – it’s still sitting in an appeals court. But tonight this Texas federal judge said – nope – no business owners in the united states have to file this BOI information at least not right now as the case plays out.
It’s important to know the judge did not rule that the corporate transparency act or the BOI requirement are unconstitutional tonight. He just ruled that the plaintiffs at this point — had demonstrated a substantial likelihood that once the evidence was presented in court — they would prevail. And he said if he allowed this January 1st deadline to stand – business owners nationwide would have their constitutional rights violated and that would cause irreparable harm.
The Department of Justice argued – congress passed this law and wants this regulation to help catch people who are committing crimes and hiding it through these fake companies but judge Mazzant said that’s not enough of a reason. He said while the constitution does give congress the power to regulate commerce and does restrict states from interfering with that power – “the commerce clause does not justify regulating all companies based on nothing more than the fear that a reporting company might shelter a financial criminal. … no matter how laudable its goals, congress’s actions must abide by our constitution”
It is very likely the Department of Justice will appeal this ruling just like they did with the Alabama ruling. The question is – what’s going to happen to these appeals once the trump administration takes over? How will Trump’s new AG approach these cases and this BOI requirement? I will keep you posted.
Read the ruling here.
Statement from plaintiffs here.
