BOI Reporting Obligation is Working Its Way Through the Court – Still Not Required YET

The Beneficial Ownership Interest (BOI) reporting requirement is still suspended, but we are getting closer to potentially seeing it applied.

MARPA has previously warned members about the reporting obligations that were originally set to take effect in January 2025 See the bottom of this post for links to past articles). These requirements came from the Corporate Transparency Act (CTA) which requires businesses to report their BOI.

As a brief reminder, businesses are exempt from this obligation if they meet all three of the following criteria:

1. They have more than 20 full-time domestic employees.
2. Their gross domestic receipts or sales exceed $5 million.
3. They have an operating presence at a physical office within the United States.

This exemption generally applies to larger businesses. Therefore, many smaller businesses will be required to submit the necessary BOI information.

BOI reporting has been challenged in court through two separate cases. Our updates thus far have primarily focused on one case, Texas Top Cop Shop, Inc. v. Garland. Below is a timeline of the BOI obligations based on this legal challenge:

• December 5, 2024: A Texas federal district court ordered an injunction on BOI reporting, suspending the obligation.
• December 23, 2024: The 5th Circuit Court of Appeals reversed the injunction, reinstating BOI reporting. The court also scheduled expedited oral arguments for March 25, 2025.
• December 26, 2024: The 5th Circuit’s Merit Panel reversed the previous reversal, reinstating the injunction. As a result, the reporting obligation was once again suspended.

The matter was subsequently brought before the Supreme Court, which issued its decision on Friday, January 23, 2025. The Court issued a stay on the December 5 injunction, which technically reinstated the BOI reporting obligation until the conclusion of the appeal in the 5th Circuit. In his concurring opinion, Justice Gorsuch suggested that the court should examine whether it is inappropriate for a a district court to issue universal injunctive relief (e.g. he seems to feel that trial courts should not be allowed to stay enforcement of a law across the entire country).

BOI reporting requirements remain suspended due to a decision in a separate case, Smith v. United States Department of the Treasury. On January 7, 2025, the U.S. District Court for the Northern District of Texas issued a nationwide injunction in this case, prohibiting enforcement of the CTA and suspending all reporting requirements under it, including BOI reporting.

This injunction drew on some analysis from the earlier case but also provided its own reasoning. The court granted the injunction based on its determination that Smith is likely to succeed on the merits of the challenge to the CTA. The court examined the constitutionality of the CTA and concluded that the Act would likely be found to exceed Congress’s power to regulate interstate commerce or other enumerated powers.

The Supreme Court did not comment on the CTA’s constitutionality or the likelihood of success for either party. Therefore, it remains unclear whether businesses will need to comply with the reporting obligation in the near future.

As a best practice, businesses may wish to maintain accurate ownership information internally. This ensures that, should the obligation to report arise, the necessary information is readily available to ensure compliance.