1099-K Reporting is Coming
The IRS After January 20

Court Issues Injunction Halting BOI Reporting

 

By Nathan George, CPA-Abilene

 

On Tuesday, Dec. 3, 2024, a federal district court in the Eastern District of Texas issued a nationwide injunction against the Corporate Transparency Act (CTA) and its implementing regulations. In Texas Top Cop Shop, Inc., vs. Garland, the court cited the “CTA’s attempt to regulate companies that are registered to do business under State’s laws…on pain of severe penalties” without any “tenable theory that the (law) falls within Congress’ power.” Ultimately, the court found the CTA is likely unconstitutional, thus prohibiting the Financial Crimes Network (FinCEN) from enforcing its requirements, which include:

 

  • Submitting beneficial ownership information (BOI) reports to FinCEN,
  • Providing detailed personal information about beneficial owners, and
  • Complying with ongoing reporting obligations.

 

The decision is, however, preliminary and temporary, and could quickly change as the case moves through the legal system. Treasury filed an appeal with the Firth Circuit Court on December 5 and it is unknown how the Fifth Circuit may respond.

 

Impact to “Reporting Companies”

 

The ruling comes days before the required reporting deadline of Jan. 1, 2025, for the majority of companies that were formed before Jan. 1, 2024. While reactions have varied, certain themes for action have arisen.

 

Hurry Up and Wait

 

Consistent with AICPA’s guidance, many firms have advised a “hurry-up-and-wait” approach, instructing reporting companies to continue gathering relevant information, in anticipation that the reporting requirement may soon resume. From AICPA’s December 6 statement:

 

“While we do not know how the Fifth Circuit court will respond, the AICPA continues to advise members that, at a minimum, those assisting clients with BOI report filings continue to gather the required information from their clients and are prepared to file the BOI report if the injunction is lifted.”

 

Voluntary Reporting

 

If the plaintiff loses the case, Treasury (and FinCEN) could stick to its guidance and there may be consequences for missing the deadline. As such, another option is for reporting companies to move forward with reporting despite the decision. FinCEN has confirmed it will comply with the injunction but will continue to accept voluntary submissions while the litigation is pending resolution. From its website:

 

“In light of a recent federal court order, reporting companies are not currently required to file beneficial ownership information with FinCEN and are not subject to liability if they fail to do so while the order remains in force. However, reporting companies may continue to voluntarily submit beneficial ownership information reports.”

 

Moving Forward

 

In addition to the Texas Top Cop Shop case, other efforts could impact the reporting measures. As noted in its November 11 letter to Congress, AICPA and 54 state CPA societies continue to raise concerns regarding “the lack of awareness in the small business community.” AICPA has requested an extension of “at least a year so the small business community can become better informed of their filing requirement.” 

 

Appropriate action will, of course, be situation dependent. CPAs should continue to keep their existing client base informed, monitoring changes and relaying relevant information. To meet this need, both AICPA and TXCPA are continually updating their respective resource pages as things continue to evolve.

 

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