Just three days after the U.S. Court of Appeals for the 5th Circuit reinstated a rule requiring businesses, including farms, to file Beneficial Ownership Information (BOI), the same court has now reversed itself, giving businesses a reprieve from filing requirements.
The 5th Circuit on Dec. 26 issued a new order to expedite a hearing on a case out of Texas tied to BOI, and in doing so, the 5th Circuit vacated its own ruling from Dec. 23.
Essentially, the court vacated the federal government’s motion to stay a preliminary injunction against enforcing the Corporate Transparency Act (CTA). Under the latest reversal by the appeals court, a nationwide injunction out of a Texas federal court in early December will continue to block the Treasury Department from enforcing the act.
The court decisions are now happening so fast that university Extension offices and others just catching up with the Dec. 23 decision are now issuing details that are again out of date.
The National Federation of Independent Business (NFIB), one of the plaintiffs in the Texas court, issued a release early Friday explaining the 5th Circuit’s reversal.
NFIB noted, “The court’s latest decision reinstates the nationwide injunction, blocking the burdensome beneficial ownership information (BOI) reporting requirements for small businesses while the court fully considers the government’s appeal. It also nullifies a previous Fifth Circuit order that allowed the government to begin enforcing the CTA and BOI reporting requirements again.”
Rob Smith, a senior attorney for NFIB’s Small Business Legal Center, added: “The court’s reinstatement of the nationwide injunction is a welcome sigh of relief for small businesses. Since being told earlier this week that they must urgently submit their BOI reports, our nation’s small businesses have experienced enormous chaos and confusion. Thankfully, the court’s latest decision recognizes that the CTA and BOI reporting requirements pose serious constitutional questions. It also provides Main Streets across the country with a reprieve from this harmful mandate while our lawsuit proceeds.”
The BOI rules affect roughly 230,000 farm operations, according to an analysis in October by the American Farm Bureau Federation. Overall, the rules affect more than 32 million businesses.
The CTA, which was passed in 2021, requires businesses to provide their ownership information to the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN). The law was created to curb financial crimes such as money laundering and fraud. The initial deadline to file those reports was Jan. 1, 2025.
U.S. District Judge Amos Mazzant in the U.S. District Court of Eastern Texas, initially granted a nationwide injunction on Dec. 3 blocking the BOI rule in a case, Texas Top Cop Shop Inc., et al v Garland et al. In the injunction, Mazzant stated the CTA is likely unconstitutional as outside Congress’ power and creates a “new form of federal power,” he stated. Mazzant described the law a “quasi-Orwellian statute” as well.
“The notation that one may use a company to veil their illicit financial crimes is unassailable. But 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,” Mazzant wrote.
On Dec. 23, a three-judge motions panel in the 5th Circuit reinstated the rule, noting that companies are once again required to file beneficial ownership information with FinCEN. The panel criticized the late preliminary injunction and cited the public interest in combatting financial crimes. The panel also orders an expedited appeal with oral arguments in the Texas case.
With that, FinCEN also delayed the reporting requirements until Jan. 13, 2025.
In its two-page order on Dec. 26, the merits panel of the 5th Circuit stated that “in order to preserve the constitutional status quo while the merits panel considers the parties’ weighty substantive arguments,” the panel vacates the early ruling to stay Mazzant’s preliminary injunction.
The Top Cop case is just one of several cases pending nationally about the CTA and its constitutionality. — Chris Clayton, DTN ag policy editor
