The Department of Justice (DOJ) has filed an emergency petition with the Supreme Court seeking to block a district court injunction that prevents the government from enforcing the Corporate Transparency Act and its beneficial ownership information (BOI) reporting requirements.
The Justice Department said in a request filed Tuesday that the government is likely to prevail in the case. “The Act’s reporting requirements are important to the government in preventing, detecting, and prosecuting crimes such as money laundering, tax evasion, and terrorist financing,” the Justice Department wrote. “Thus, this requirement falls comfortably within Congress’ authority under the Commerce Clause to regulate economic activities that materially affect interstate commerce (in this case, the anonymous operation of business entities).”
The requirements of CTA PL 116-283 are also “to effectuate some of the enumerated powers of Congress, including the power to regulate interstate and foreign commerce and levy taxes, and the power of Congress with respect to foreign affairs. necessary and appropriate,” the Justice Department said. “Even if there were extraordinary circumstances in which this law could be considered to exceed the authority of Congress, this law is constitutional in most applications and sufficient to overcome defendants’ superficial objections.” It is.”
While the CTA “imposes only minimal burdens” on defendants, the court’s “universal injunction inflicts irreparable harm on the federal government in a number of ways,” the request states. It’s dark. “It impedes the government’s enforcement of duly enacted laws of Congress, impedes efforts to prevent financial crime and protect national security, and undermines the United States’ ability to compel other countries to improve their anti-money laundering regimes. enforcement of laws that undermine and seriously disrupt ongoing policy. ”
On Friday, the Supreme Court set a deadline of 4 p.m. ET on January 10 for the plaintiffs in the case to respond to the Justice Department’s request.
The AICPA posted a statement on the BOI Reporting Resource Center saying it “recommends that you gather the necessary information and have it ready to submit if the injunction is lifted.”
The Financial Crimes Enforcement Network (FinCEN), which enforces the CTA, estimates that more than 32 million reporting companies will be required to submit BOI reports.
in court
A federal district court issued an injunction in Texas Top Cop Shop, Inc. v. Garland, No. 4:24-CV-478 (ED Texas 12/3/24). Under this injunction, the CTA and BOI reporting regulations will not be enforceable and reporting companies will not be required to comply with the January 1, 2025 BOI reporting deadline until further order of the court.
The Department of Justice, which filed a notice of appeal two days later, told the Fifth Circuit that it had “until December 27, 2016 to ensure that regulated entities are aware of their compliance obligations by January 1, 2016. “We requested that the government rule on the suspension request.” 2025. ”
A panel of judges from the Fifth Circuit initially put the injunction on hold, saying, “The government has a strong indication that it is likely to succeed on the merits in defending the constitutionality of the CTA.” But three days later, a separate Fifth Circuit panel of judges considering appeals reinstated the injunction.
background
Under the CTA, passed by Congress in 2021 to combat money laundering, reporting companies must disclose the identity and information about the entity’s beneficial owners. For new entities established after January 1, 2024, the reporting company must also disclose the identity of the “applicant.” “Applicant” is defined as an individual applying to form a corporation, limited liability company, or other similar entity.
Willful violations carry fines of $591 per day up to a maximum of $10,000, and unauthorized disclosure carries equally severe penalties, including two years in prison.
AICPA advocacy
The AICPA and state CPA associations sent numerous letters to Congress and FinCEN requesting a delay in the reporting deadline. The one-year delay in BOI reporting requirements was included in a spending bill proposed in the House of Representatives several weeks ago. However, the bill that passed Congress, avoiding a government shutdown, did not include any provisions regarding the BOI deadline.
AICPA regularly updates the BOI Report Resource Center.
— To comment on this article or suggest an idea for another article, contact Martha Wagoner at Martha.Wagoner@aicpa-cima.com.
