Court Issues Injunction Halting BOI Reporting

Published: Dec 11, 2024

The IRS and Treasury issued final regulations requiring brokers to report digital asset sales and exchanges starting Jan. 1, 2026. Guidance includes rules for basis, gains/losses, and backup withholding. Learn more: irs.gov/newsroom

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 “the 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. 

 

Topics:

You May be Interested in

  • The Verdict is In. The Texas Franchise Tax is GILTI, Raising New Questions and Potential Issues
    Beginning with the 2026 report year, the Texas Comptroller will align the franchise tax with the current Internal Revenue Code, likely requiring GILTI to be included in total revenue. This change raises sourcing, statutory and potential constitutional questions for businesses with foreign operations, creating new uncertainty and possible tax impacts.
  • NIL Income for Student-Athletes: Tax Implications and Emerging Pitfalls for Practitioners
    The expansion of NIL opportunities has created complex tax issues for student-athletes, whose income is generally treated as self-employment business income. Common pitfalls include unreported non-cash compensation, multi-state tax exposure, weak recordkeeping and limited financial literacy, all of which heighten audit risk. As IRS scrutiny increases and new reporting rules emerge, CPAs must understand these challenges to effectively advise this growing group of taxpayers.
  • Data Processing Services – SaaS and Software Licenses
    Cloud-based SaaS is treated as a taxable data processing service in Texas, with 80% of the sales price subject to sales tax, compared with 100% taxation for traditional software licenses. Taxpayers using SaaS in multiple states can further reduce Texas tax by allocating the software’s usage between Texas and non‑Texas locations. This often results in significant savings and may allow refunds for past overpayments.
More News

Support the Next Generation

Donate to TXCPA scholarships and help aspiring accountants achieve their goals.

Scholarships