The U.S. Court of Appeals for the Fifth Circuit ruled in favor of the U.S. Department of Justice reversing the injunction on the Corporate Transparency Act (CTA), reinstating the Jan. 1 deadline for businesses to file a corporate transparency report with beneficial ownership information (BOI). 

Businesses that miss the deadline face up to two years imprisonment, fines and up to $10,000 and civil penalties up to $591 per day. 

The U.S. District Court for the Eastern District of Texas issued the injunction earlier this month in the case, Texas Top Cop Shop, Inc., et al. v. Merrick Garland, Attorney General of the United States, et al. The questions the constitutionality of the CTA, which is meant to expose criminal activity by removing corporate anonymity. 

The Fifth Circuit, located in New Orleans, stated in its order that the government made a strong showing that it is likely to succeed on the merits in defending the CTA’s constitutionality. 

The National Federation of Independent Business (NFIB) which filed the suit said it is “extremely disappointed” by the decision in a press release. 

“Because of this decision, small business owners must scramble to meet the reporting requirements of this egregious statute. Enforcing a Jan. 1 deadline for compliance will mean massive chaos for our nation’s small businesses,” said Beth Milito, executive director of NFIB’s Small Business Legal Center, in the release. “The district court, in granting the preliminary injunction, rightly recognized that the BOI reporting requirements would have devastating consequences for small business owners. Make no mistake, NFIB is already working to quickly appeal this terrible decision and provide our Main Streets with a reprieve from this harmful mandate.”

The release says more than 32 million small businesses are subjected to the statute, including nearly 300,000 NFIB member businesses represented in the lawsuit. 

Federal regulators estimate just a third of the entities required to file under the CTA have done so, according to an S Corporation Association email. It says “there’s little doubt” that most of the remaining 20 million entities will not be able to comply with the filing requirements before the end of the year. 

“This fight is not over,” the email says. “Next step on the advocacy side will be to work with the incoming Trump Administration to delay the filing deadline administratively. This won’t help existing companies which already reported their Beneficial Ownership Information, but it will help new incorporations and those businesses that failed to file.”

The Eleventh Circuit Court of Appeals has yet to make a decision on an appeal filed by the feds to a March decision by the Alabama U.S. District Court, which ruled that the CTA is unconstitutional.

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