UPDATE: 3.24.2025: All entities originally established in the United States, including those previously classified as ‘domestic reporting companies,’ and their beneficial owners are now exempt from reporting beneficial ownership information (BOI) to the Financial Crimes Enforcement Network (FinCEN.) Foreign companies registering to do business in the United States are required to report BOI at least 30 days from the publication date of the interim final rule (March 21, 2025) or 30 days from the effective date of registering to do business in the US, whichever is later.
UPDATE: 2.28.2025: The Financial Crimes Enforcement Network (FinCEN) announced that it will not issue any fines or penalties or take any other enforcement actions against any companies who fail to file or update beneficial ownership information (BOI) reports pursuant to the Corporate Transparency Act (CTA). Until the forthcoming interim final rule becomes effective and the new relevant due dates (which have not been announced) have passed, no fines or penalties will be imposed. FinCEN intends to issue an interim final rule that extends BOI reporting deadlines by March 21, 2025. FinCEN also intends to solicit public comment on potential revisions to existing BOI reporting requirements.
There is still a bill in the Senate to extend the filing date to January 1, 2026, but it has not been acted on yet.
UPDATE: 2.20.2025: FinCEN has resumed enforcement of the Corporate Transparency Act following the lifting of a nationwide injunction. On February 18, 2025, the U.S. District Court for the Eastern District of Texas lifted the injunction that had previously halted the CTA’s implementation. This decision reinstates the requirement for companies to disclose their beneficial ownership information to FinCEN.
In response, FinCEN has extended the filing deadline for most companies to March 21, 2025, to allow for additional time to comply with the reporting requirements. Companies formed or registered on or after February 18, 2025, must file their initial beneficial ownership information reports within 30 days of formation or registration. Entities that had previously been granted extended deadlines due to disaster relief or other considerations should adhere to their specific deadlines.
Failure to comply with the CTA’s reporting obligations can result in significant penalties, including fines and potential criminal charges. For additional information, visit FinCEN’s website.
UPDATE: 1.23.2025: The Supreme Court stayed the injunction in the Top Cop case outlined below, but there is another nationwide injunction resulting from a different case (Samantha Smith and Robert Means v. US Department of Treasury) and that has not been appealed by the government, yet. What does this mean for you? According to the FINCEN website, and the language cited below, filing is still voluntary:
“On January 23, 2025, the Supreme Court granted the government’s motion to stay a nationwide injunction issued by a federal judge in Texas (Texas Top Cop Shop, Inc. v. McHenry—formerly, Texas Top Cop Shop v. Garland). As a separate nationwide order issued by a different federal judge in Texas (Smith v. U.S. Department of the Treasury) still remains in place, reporting companies are not currently required to file beneficial ownership information with FinCEN despite the Supreme Court’s action in Texas Top Cop Shop. Reporting companies also are not subject to liability if they fail to file this information while the Smith order remains in force. However, reporting companies may continue to voluntarily submit beneficial ownership information reports.” Beneficial Ownership Information Reporting | FinCEN.gov
UPDATE 12.26.24: CTA BOI reporting is voluntary again. See below for the full explanation.
Late December 26, 2024, the Fifth Circuit Court of Appeals vacated the Court’s earlier decision to lift the nationwide injunction at least until the Fifth Circuit Court can hear and rule on a full appeal. So in this never ending saga we are now in the same situation as we were before the December 23rd order lifting the injunction, meaning, based on the BOI website, reporting is voluntary for the time being.
UPDATE 12.23.24: New Update, New Deadline to Report January 13, 2025: On December 23, 2024, the Fifth Circuit stayed the injunction on the requirement to file the beneficial ownership information (BOI) as required by the corporate transparency act (CTA). This means nonexempt entities are required to file the beneficial ownership information with FinCen on or before the due date. Reporting entities will have a little extra time to report as the due date has been moved to January 13, 2025. There was a bill in Congress that included a delay for this requirement but that part of the bill did not pass. As Congress has adjourned for the holiday, another delay is doubtful. For entities formed after December 4, 2024, they will have an addition 21 days to report.
UPDATE 12.9.24: The BOI website was updated over the weekend to reflect the effect of the nationwide injunction issued by the Texas district court.
Once on the website look for a red bell icon with the heading: “Alert: Impact of Ongoing Litigation – Deadline Stay – Voluntary Submission Only”
Once expanded you will find, in part, the following:
In light of a recent federal court order, reporting companies are not currently required to file beneficial ownership information with FinCEN and are not subject to liability if they fail to do so while the order remains in force. However, reporting companies may continue to voluntarily submit beneficial ownership information reports.
Here the government is saying that reporting is on pause and completely voluntary while the injunction is in place, and as such there will be no penalties assessed while the injunction is in place. If the injunction is lifted before year end, reporting could be required again, but it is doubtful the government will assess penalties due to the confusion. If the injunction is lifted after the year end, and the Corporate Transparency Act is found to be constitutional, it is possible that the government could require reporting for 2024 and prior periods at a later date in 2025.
Background
In 2021, Congress enacted the Corporate Transparency Act (CTA) which requires enhanced reporting of beneficial ownership in reporting companies. Most businesses will be subject to the new filing requirement, including:
• Businesses earning less than $5 million in gross receipts and with fewer than 20 full time employees must file.
• Certain large operating entities and certain publicly traded companies are exempt. There is a list of 23 exceptions. However, most businesses are not exempt.
• Most Section 501(c) and 501(a) organizations are exempt.
The beneficial ownership reporting requirements will be administered and monitored by the US Department of Treasury’s Financial Crimes Enforcement Network (FinCEN). The CTA’s new reporting requirements are targeted at catching tax fraud, terrorism and money laundering by requiring enhanced reporting of beneficial ownership in reporting companies.
Effective Dates
January 1, 2024 is the effective date of the CTA reporting requirements.
• Reporting companies which are in existence on the effective date must file their initial reports within one year. Thus, business must file their reports on or before December 31, 2024.
• Reporting companies that are formed on or after January 1, 2024, must file their initial report within 90 days of receiving actual or public note that the creation or registration of a reporting company became effective.
Penalties
Failure to timely meet the Beneficial Ownership Information (BOI) reporting requirements may trigger civil penalties of up to $500 for each day that the violation continues. Additionally, an individual may also be subject to criminal penalties of up to two years imprisonment and a fine of up to $10,000.
CTA in the Courts
On December 3rd, 2024 in Texas Top Cop Shop Inc. v. Garland, the U.S. District Court for the Eastern District of Texas (which is in the Fifth Circuit, along with all Louisiana federal districts) granted a nationwide preliminary injunction in favor of the plaintiffs which essentially prevents the government from enforcing the CTA. Specifically the ruling provides, “[t]he Court has determined that the CTA and Reporting Rule are likely unconstitutional for purposes of a preliminary injunction. It has not made an affirmative finding that the CTA and Reporting Rule are contrary to law or that they amount to a violation of the Constitution.” It should be noted that this is a preliminary injunction which could be overturned by appellate courts, and businesses subject to the CTA should check in regularly with their attorneys as the case progresses. The Order can be found here: https://8389730.fs1.hubspotusercontent-na1.net/hubfs/8389730/US_DIS_TXED_4_24cv478_d103766976e2849_MEMORANDUM_OPINION_AND_ORDER_It_is_therefore_ORDER.pdf?utm_campaign=Firm&utm_medium=email&_hsenc=p2ANqtz-_5LJpcpkkp7PDNdEoYmSIPPz8QqF6hHDArmlLQbHjHQt7ItjHM7mixIujOmyMVaL7K_fVQENirX1aCG5BGYQxPenSNWA&_hsmi=336991028&utm_content=336991028&utm_source=hs_email
On March 1, 2024, the U.S. District Court for the Northern District of Alabama ruled in National Small Business United, d/b/a the National Small Business Association, et al. v. Yellen, et al., that the CTA exceeds Congress’ power and is thus unconstitutional. Please note that this decision only affects the plaintiffs, the National Small Business Association and business owner Isaac Winkles, and should not be relied upon by other business owners who should continue to consult with their attorneys as to their reporting obligations under the CTA. Many professionals expect the government to appeal this decision and that it could potentially be overturned. LaPorte will continue to monitor this case, and any others that may arise.
Going Forward
The CTA is a brand new reporting requirement which should be complied with starting in 2024. However, given the court rulings against the enforcement of the CTA it is highly recommended that clients reach out to their legal counsel for advice as to their filing obligations.
While LaPorte is not offering CTA compliance services, we have a team analyzing the case law and any updates regarding the filing requirements and will provide relevant information as it comes available.
If you have questions or need additional information, please visit the FAQ section of the FinCEN website at https://fincen.gov/boi-faqs.