BOI Reporting Requirement Deadline Delayed
While companies have been busy preparing for the Jan. 1, 2025, effective date of the Beneficial Ownership Information (BOI) reporting requirements under the Corporate Transparency Act (CTA), the U.S. District Court for the Eastern District of Texas has been busy hearing arguments challenging the law’s constitutionality.
The National Federation of Independent Business and several of its members claim that the CTA exceeds Congress’s authority to regulate interstate commerce, which violates the First Amendment by compelling speech and infringing freedom of association, and violates the Fourth Amendment by forcing the disclosure of private information. The Court issued a preliminary injunction blocking the enforcement of the BOI reporting requirements. Subsequently, the Department of Justice, on behalf of the Department of the Treasury, filed a Notice of Appeal on Dec. 5, 2024.
Background
The CTA, enacted in 2021 and effective Jan. 1, 2025, aims to combat illicit activities such as money laundering, tax fraud, and terrorism financing by increasing transparency in business ownership. The CTA requires businesses registered with a Secretary of State or similar body in the United States to file BOI reports with the FinCEN. These reports must disclose information about individuals with financial interest or substantial control in the reporting company. The objective of this requirement is to prevent individuals from using anonymous shell companies to hide illegal activities, thereby enhancing national security and economic integrity.
What This Means for Reporting Companies
Temporary Suspension
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.
Voluntary Compliance
While reporting is not required during the injunction period, reporting companies may continue to voluntarily submit beneficial ownership information reports.
Next Steps
At this time, it is unclear if or when the temporary injunction will be lifted and if or when reporting requirements will resume. GBQ will continue to monitor developments related to the BOI reporting and provide updates as appropriate. Companies can also get the latest updates by visiting FinCEN’s website.
Article written by:
Tyler Gabalski, CPA, Manager, Tax & Business Advisory Services
Kevin Dunn, CPA, Director, Tax & Business Advisory Services
