Key Implications of the Preliminary Injunction for Tax Practitioners

The recent nationwide preliminary injunction against the Corporate Transparency Act (CTA) enforcement creates significant uncertainty for tax practitioners handling beneficial ownership information (BOI) reporting. Here's what practitioners need to know:

Current Status and Client Guidance

The injunction halts enforcement of the CTA and its January 1, 2025, filing deadline. However, since this is a preliminary injunction, not a final ruling, practitioners should advise clients to continue gathering required information while waiting for further developments. This approach ensures readiness if the injunction is lifted or modified.

Liability Considerations for Practitioners

Tax practitioners should exercise caution when offering BOI filing services:

• Document all client communications regarding BOI reporting decisions
• Obtain written confirmation from clients about whether to proceed with or pause filing
• Include disclaimers in engagement letters about the uncertain legal status of BOI requirements
• Consider implementing separate engagement letters specifically for BOI services to limit liability exposure

Practical Recommendations

When advising clients, practitioners should:

1. Continue collecting necessary information for potential future filings
2. Maintain detailed records of beneficial ownership percentages and control relationships
3. Monitor FinCEN announcements and legal developments
4. Implement systems to track 30-day deadlines for new entities if the requirement is reinstated

Small Business Considerations

Small businesses face a complex decision:

• Those who haven't filed: Can reasonably pause filing plans while maintaining readiness
• Those who have already filed: No immediate action required, but should preserve documentation
• New businesses: Should still collect required information during formation

Risk Management Strategy

To protect themselves and their clients, practitioners should:

• Develop clear internal policies for handling BOI-related services
• Create standardized documentation procedures
• Establish client communication protocols for updating them on significant developments
• Consider professional liability insurance coverage specific to BOI reporting services

Future Outlook

The preliminary injunction may lead to:

• Potential extension of deadlines (possibly to 2026)
• Refinement of "substantial control" definitions
• Clarification of reporting requirements
• Modified enforcement mechanisms

Based on the current situation, tax practitioners should maintain a cautious approach while ensuring preparedness for potential reinstatement of the requirements. The safest course is to continue information gathering while pausing actual filings unless specifically requested by clients, with appropriate documentation of all decisions and communications.

Remember, this injunction may be temporary, and practitioners should stay informed about developments to provide timely guidance to their clients. The conservative approach of maintaining readiness while awaiting final resolution protects both practitioners and their clients.

Christine Gervais is a licensed CPA, using her skills to help businesses grow and achieve their fullest potential. Christine has a Master’s degree in accounting from Southern New Hampshire University in addition to holding her CPA license for over a decade. Notably, Christine is a nationally recognized speaker providing education to other CPAs on how to best serve clients as well as instruction on a wide variety of topics for business owners on how to maximize success. Christine prides herself on the value she can bring to clients with her extensive tax knowledge and provides strategic, forward-thinking financial strategies to help clients grow. When not behind her desk, you can find Christine spending quality time with her daughter and stepson or tending to the family’s excessively loved farm animals.