DOJ asks Supreme Court to block injunction on BOI reporting

The Supreme Court Considers DOJ Request to Reinstate Corporate Transparency Act Enforcement

The Department of Justice (DOJ) has submitted an emergency application to the Supreme Court, seeking to overturn a district court injunction that currently blocks the enforcement of the Corporate Transparency Act (CTA). The injunction prevents the government from requiring companies to report beneficial ownership information (BOI) under the Act.

DOJ’s Argument for Reinstatement

In its application, filed on Tuesday, the DOJ argued that the CTA’s requirements are critical for combating financial crimes such as money laundering, tax evasion, and terrorism financing. The DOJ emphasized that these reporting obligations align with Congress’s constitutional authority under the Commerce Clause to regulate economic activities affecting interstate commerce, including the anonymous operation of business entities.

The DOJ further stated that the Act’s provisions are “necessary and proper” to enforce Congress’s powers, such as regulating interstate and foreign commerce, collecting taxes, and addressing foreign affairs. Even if certain circumstances could potentially challenge the Act’s constitutionality, the DOJ maintained that it is lawful in the majority of its applications, which invalidates the respondents’ facial challenge.

According to the DOJ, the CTA imposes minimal burdens on businesses while the current universal injunction harms the federal government’s ability to combat financial crimes, protect national security, and encourage global anti-money-laundering reforms. The injunction also disrupts the ongoing implementation of the Act, including the preparation of regulated entities for compliance with the January 1, 2025, deadline.

CTA Requirements and Enforcement

The CTA, enacted in 2021 as part of Congress’s anti-money-laundering efforts, mandates that reporting companies disclose the identity and information of their beneficial owners. New entities formed after January 1, 2024, must also disclose the identity of applicants who file formation documents.

Failure to comply with the reporting requirements carries penalties, including fines of up to $10,000 and imprisonment for up to two years for willful violations. Unauthorized disclosure of BOI is similarly punishable.

The Financial Crimes Enforcement Network (FinCEN), tasked with enforcing the CTA, has estimated that over 32 million companies will be required to submit BOI reports.

Legal Developments

The district court injunction was issued in the case of Texas Top Cop Shop, Inc. v. Garland (No. 4:24-CV-478). The ruling blocked the enforcement of the CTA and its BOI reporting requirements, meaning companies are not obligated to comply with the January 1, 2025, reporting deadline unless the injunction is lifted.

The DOJ promptly appealed the decision, asking the Fifth Circuit Court to stay the injunction by December 27 to provide regulated entities sufficient notice of their obligations. Initially, a panel of Fifth Circuit judges supported the DOJ’s argument, stating the government had demonstrated a strong likelihood of success in defending the CTA’s constitutionality. However, a subsequent panel reinstated the injunction pending further review.

Background and Advocacy

The CTA aims to enhance transparency by requiring companies to disclose beneficial ownership information to deter financial crimes. Reporting obligations apply to beneficial owners and applicants of entities such as corporations and LLCs. Willful non-compliance or unauthorized disclosures are subject to strict penalties.

The American Institute of Certified Public Accountants (AICPA) and state CPA societies have advocated for a delay in the reporting deadline, citing the burden on businesses. While a proposed spending bill in the House of Representatives initially included a one-year delay for BOI reporting, the final version passed by Congress did not include this provision.

As the legal battle continues, the DOJ awaits the Supreme Court’s decision on whether the CTA enforcement can proceed, ensuring transparency and compliance in financial reporting.

Waggoner, M. (2025). DOJ asks Supreme Court to block injunction on BOI reporting. https://www.journalofaccountancy.com/news/2025/jan/doj-asks-supreme-court-to-block-injunction-on-boi-reporting.html?fbclid=IwZXh0bgNhZW0CMTEAAR3IDQxaWkX7P9kJw_hojUas27yLVq0uf5Q3muMauTPY4T0CXr74SbIhreo_aem_V29R73ZFY55k0hw1LsCytA