Many [business owners] likely have received multiple and conflicting information recently from their accountants and attorneys on the status of beneficial ownership information (BOI) reporting under the Corporate Transparency Act (CTA). Companies currently have no obligation to file a BOI report with the Treasury Department’s Financial Crimes Enforcement Network (FinCEN).

On December 26, the nationwide, preliminary injunction against enforcement of the CTA and its BOI reporting regulation was reinstated. Until the constitutionality of the CTA is resolved by the courts, companies are not required to file a BOI report, but they may voluntarily file a report. [File here for FREE: https://boiefiling.fincen.gov/boir/html]

This matter has been very frustrating and likely confusing for [owners] and all businesses, with plenty of outdated information making things worse.

The CTA became effective on Jan. 1, 2024. It requires reporting companies to register with FinCEN and disclose their ultimate, natural person beneficial owners through BOI reports. The CTA was enacted to “help prevent and combat money laundering, terrorist financing, corruption, tax fraud, and other illicit activity, while minimizing the burden on entities doing business in the [U.S.]”  FinCEN estimates at least 32 million existing companies will need to file BOIs to comply with the CTA.

A reporting company is defined as a corporation, a limited liability company or other entity that is: (1) formed by filing documents with a secretary of state or similar office of a state or Indian tribe, or (2) formed under the law of a foreign country and registered to do business in the U.S.

FinCEN has provided an extensive list of entities exempted from that definition, including:

- Publicly traded companies

- Public utilities

- Entities that have more than 20 employees, operate at a physical office in the U.S., and filed federal tax returns showing more than $5 million in gross receipts or sales

Some companies are likely to meet this last exemption.

FinCEN’s initial timing for BOI reporting depended on when a company was formed. For reporting companies formed prior to Jan. 1, 2024, reports were to be filed no later than Jan. 1, 2025. For entities formed on or after Jan. 1, 2024, reports were to be filed within 30 calendar days of when the company received actual notice that its creation had become effective or when the secretary of state or similar office provided public notice of its formation, whichever was first.

Six weeks after FinCEN issued its final BOI reporting rule, the National Small Business Association filed a lawsuit in Alabama challenging the constitutionality of the CTA and BOI regulations. In March, the court issued a preliminary injunction, forbidding enforcement of the CTA and BOI reporting against only the plaintiffs in the case.

Courts in other jurisdictions also are considering constitutional challenges. On December 3, the U.S. District Court for the Eastern District of Texas issued a preliminary injunction suspending enforcement of the CTA and BOI reporting rule nationwide, saying that the statute likely will be found unconstitutional. On December 23, the U.S. Court of Appeals for the Fifth Circuit granted the government’s emergency motion to allow enforcement while the appeal was being decided. This ruling reinstated the January 1, 2025 reporting deadline. The same day, FinCEN delayed its deadline for BOI reports to Jan. 13, 2025.

Now, a merits panel of the Fifth Circuit has vacated the stay that allowed enforcement during the appeals process. The court explained that its decision was necessary “to preserve the constitutional status quo while the merits panel considers the parties’ weighty substantive arguments.”

[Owners] may be reporting companies subject to FinCEN’s jurisdiction for purposes of the CTA and BOI disclosures. The main takeaways for affected members are:

1. There is no obligation to file a BOI report by Jan. 13, 2025.

FinCEN revised the BOI reporting deadline to Jan. 13, 2025. However, this deadline has been suspended by the latest ruling from the Fifth Circuit, so affected companies do not have to comply with BOI reporting at this time. Affected companies still may voluntarily file BOI reports with FinCEN. [File here for FREE: https://boiefiling.fincen.gov/boir/html]

2. The latest ruling is not a final determination of the CTA’s constitutionality.

While the major takeaway of the latest legal development means [business owners] are not required to comply with the reporting deadline at this time, the ruling only temporarily halts enforcement of the BOI reporting rule. The challenges to the CTA and BOI reporting still need to be decided by the courts. The U.S. Supreme Court may eventually need to enter the fray and make the final determination. Thus, affected [business owners] must continue to monitor developments.

The litigation over the CTA and the BOI reporting rule does not affect New York’s LLC Transparency Act, which required the disclosure of certain personally identifiable information of beneficial owners of limited liability companies by Dec. 21, 2024.

Source: https://ilma.org