December 20, 2024
By Barrie Charapp Beaty
Charapp & Weiss, LLP
bbeaty@cwattorneys.com
On December 3, 2024, the Court in Texas Top Cop Shop, Inc., et al. v. Garland, et al. granted the National Federation of Independent Business’s (NFIB) request for a preliminary injunction,
which has a nationwide impact. This nationwide preliminary injunction blocks the Corporate Transparency Act and the enforcement of its Beneficial Ownership Information (BOI) reporting
requirement. Neither are able to be enforced, and the compliance deadline of January 1, 2025, is currently stayed, meaning that reporting companies are not required to submit those BOI reports
prior to the end of the year, which is the CTA’s BOI reporting deadline.
What is the Corporate Transparency Act (CTA)?
The purpose of this act, enacted by Congress on January 1, 2021, is to both prevent and combat money laundering, corruption, tax fraud, and terrorist financing. Corporations, limited liability companies, and other entities formed or registered to do business in the U.S. must adhere to the BOI reporting requirement the CTA established. Pursuant to the Act, reports were to be filed with Financial Crimes Enforcement Network (FinCEN). FinCEN lists the criteria that determines which companies will be required to report beneficial ownership information to them. There are 23 entities that are exempt from the beneficial ownership reporting requirement. Dealers and related dealer organizations have an entity exemption if 3 criteria are met. These criteria are listed below. There is also an exemption under the CTA for a wholly owned subsidiary of an exempt business.
Dealer and Related Dealer Organization Exemption
Exemption for entities that:
1. Employ more than 20 full-tome employees
2. Operate at a physical office in the U.S. AND
3. File federal tax returns demonstrating more than $5 million in gross receipts
or sales
Now that there is a preliminary national injunction in place, companies qualifying under the CTA will NOT be required to file a BOI report with FinCEN prior to January 1, 2025, and will not be subject to penalties for failing to do so.
WHITE COLLAR OVERTIME EXEMPTION UPDATE
Similarly to the CTA injunction, on November 15, 2024, the U.S. District Court for the Eastern District of Texas vacated and set aside the Department of Labor (DOL)’s April 2024 final rule that increased the salary threshold for the “white collar” overtime exemption under the Fair Labor Standards Act (FLSA) nationwide. As such, there will be no required escalator for threshold salary that goes into effect on January 1, 2025, which was set to occur under the Rule.
As we previously reported, under that Rule, effective on July 1, 2024, the annual salary threshold increased from $35,568 to $43,888 for employees who are exempt from overtime pay due to administrative, executive, professional, and outside sales professional exemptions, which meant for employees to be exempt from overtime pay for the administrative, executive, professional, and outside sales professional exemptions, the employee needed to earn no less than $43,888 a year. Under that Rule, the threshold salary was set to increase to $58,656.00 as of January 1, 2025. Due to the November 15 Texas federal court ruling, the January 1, 2025, increase will not go into effect. It is noteworthy that the court also struck the required increase that went into effect on July 1, 2024, but practically, most employers already provided their employees with the increase to meet the standards set forth in the Rule.
We previously reported that the Rule did not affect many dealerships employees. If you have an employee that is exempt currently because of the administrative, executive, and professional exemption, this Rule did not change how that person was qualified but merely required the dealership to examine the person’s salary. The rule NEVER AFFECTED other dealership employees already exempt from overtime under the salesperson, parts person, service advisors or mechanic exemption of the FLSA.