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Business alert: BOI reporting requirements have been suspended for now

Business alert: BOI reporting requirements have been suspended for now | accounting firm in baltimore md | Weyrich, Cronin & Sorra

New beneficial ownership information (BOI) reporting requirements that many small businesses were required to comply with by January 1, 2025, have been suspended nationwide under a new court ruling. However, businesses can still voluntarily submit BOI reports, according to the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN).

How we got here

Under the Corporate Transparency Act (CTA), the BOI reporting requirements went into effect on January 1, 2024. The requirements are intended to help prevent criminals from using businesses for illicit activities, such as money laundering and fraud. The CTA requires many small businesses to provide information about their “beneficial owners” (the individuals who ultimately own or control the businesses) to FinCEN. Failure to submit a BOI report by the applicable deadline may result in civil or criminal penalties or both.

Under the CTA, the exact deadline for BOI compliance depends on the entity’s date of formation. Reporting companies created or registered before January 1, 2024, have one year to comply by filing initial reports, which means their deadline would be January 1, 2025. Those created or registered on or after January 1, 2024, but before January 1, 2025, have 90 days to file their initial reports upon receipt of their creation or registration documents. Entities created or registered on or after January 1, 2025, would have 30 days upon receipt of their creation or registration documents to file initial reports.

New court ruling

On December 3, 2024, the U.S. District Court for the Eastern District of Texas issued an order granting a nationwide preliminary injunction that:

  1. Enjoins the CTA, including enforcement of the statute and regulations implementing its BOI reporting requirements, and,
  2. Stays all deadlines to comply with the CTA’s reporting requirements.

The U.S. Department of Justice, on behalf of the Treasury Department, filed an appeal in the case on December 5, 2024.

FinCEN states on its website that it “continues to believe … that the CTA is constitutional,” but while the litigation is ongoing, it will comply with the order as long as it remains in effect.

“Therefore,” it adds, “reporting companies are not currently required to file their beneficial ownership information with FinCEN and will not be subject to liability if they fail to do so while the preliminary injunction remains in effect.”

This is the latest litigation related to the CTA. In two earlier cases, U.S. District Courts upheld the BOI reporting requirements. In another case, the CTA was ruled unconstitutional, but only the named plaintiffs and their members were allowed to ignore the BOI requirements while an appeal is pending. More than 30 million other businesses still needed to meet the January 1, 2025, deadline — until now.

The future is unclear

Be aware that the ruling is preliminary, so it could be overturned or modified by future court decisions or legislation. FinCEN stated that businesses can continue to submit BOI reports voluntarily. Contact us if you have questions about how to proceed.

© 2024

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