he U.S. Fifth Circuit Court of Appeals has upheld an injunction against the implementation of the beneficial ownership information (BOI) reporting requirements for small businesses.
The justices agreed with the National Federation of Independent Business that the rule, part of the Corporate Transparency Act, was an unnecessary burden.
The Corporate Transparency Act required all businesses, no matter how small, to file financial disclosure statements, revealing who received money from the business. Backers of the law promoted it as a defense against organized crime and terrorism.
But under the law, business owners who failed to report could face thousands of dollars in fines as well as prison sentences.
“The court’s reinstatement of the nationwide injunction is a welcome sigh of relief for small businesses,” said Rob Smith, senior attorney of NFIB’s Small Business Legal Center.
“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.”
A temporary injunction halted the enforcement
Earlier this month, the U.S. District Court for the Eastern District of Texas granted NFIB’s request for a preliminary injunction, preventing the U.S. Department of Treasury from enforcing the CTA and BOI reporting requirements.
On December 23, the U.S. Court of Appeals for the Fifth Circuit blocked that injunction, which allowed the Treasury Department’s Financial Crimes Enforcement Network to enforce the CTA and its BOI reporting requirements.
If not fully repealed or found unconstitutional, NFIB said 32 million small businesses throughout the country would once again be subjected to the statute, including the nearly 300,000 NFIB member businesses represented in this lawsuit.
NFIB said there is currently opposing legislation pending in Congress – the Repealing Big Brother Overreach Act — that it said would repeal the CTA and permanently “relieve small businesses of the BOI reporting requirements,” reports Consumer Affiars.
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