CTA FinCEN BOI - FINALLY getting somewhere

 

Treasury Department Announces Suspension of Enforcement of Corporate Transparency Act Against U.S. Citizens and Domestic Reporting Companies

March 2, 2025

The Treasury Department is announcing today that, with respect to the Corporate Transparency Act, not only will it not enforce any penalties or fines associated with the beneficial ownership information reporting rule under the existing regulatory deadlines, but it will further not enforce any penalties or fines against U.S. citizens or domestic reporting companies or their beneficial owners after the forthcoming rule changes take effect either. The Treasury Department will further be issuing a proposed rulemaking that will narrow the scope of the rule to foreign reporting companies only.

https://home.treasury.gov/news/press-releases/sb0038

FinCEN BOI Confusion Unconfused

We've been trying to keep clients apprised of the changing landscape and legal requirements of the new "BOI" reporting required by the Financial Crimes Enforcement Network of the US Treasury Department.  

Here are the basics to know before trying to figure out the latest news regarding whether or not this entire system is constitutional.

#1 - What is the FinCEN BOI?   The United States Government, Department of Treasury Financial Crimes Enforcement Network (FinCEN) is attempting to determine who owns which small legal entities throughout the entire country. This effort is required by the Corporate Transparency Act (CTA) which was promulgated as part the larger National Defense Authorization Act of 2020 (NDAA). Congress passed the NDAA and overrode then-President Trump's veto of the act in January of 2021 with an effective date of January 1, 2024.  The Corporate Transparency Act requires virtually all small entities (each defined as a “reporting company”) to file, in the absence of an exemption, information on their “beneficial owners” with the Financial Crimes Enforcement Network (“FinCEN”) of the U.S. Department of Treasury (“Treasury”).  (The stated rationale for the law is to reduce foreign money laundering, although it is difficult for some of us to understand how a database of people and small entities will assist in this endeavor or why they would exclude the large enterprises which undoubtedly are responsible for the vast majority of money-laundering activity.  There is no record as to why or how a HOA, for example, would be laundering foreign funds, but the fact that nobody really "owns" an HOA does not exempt them from the requirement to name their beneficial owners and to provide driver's licenses or passports for all beneficial owners with harsh penalties for failing to do so). The private "ownership" information is not supposed to be publicly available, but FinCEN will disclose filed information to U.S. federal law enforcement agencies, prosecutors, judges and other enforcement agencies and to financial institutions and their regulators.

#2 - Where is the BOI Filed?  https://fincen.gov/boi

#3 - What information is required? See the FAQs.  https://fincen.gov/boi-faqs#B_1

#4 - When is it due?  For entities filed in 2025, within 30 days of formation.  For older entities, the BOI was due by 1/1/2025.  However, there is pending litigation which has delayed the deadlines, and we do not know how this will be resolved.

#5 -  What are the penalties for noncompliance? As specified in the Corporate Transparency Act, a person who willfully violates the BOI reporting requirements may be subject to civil penalties of up to $500 for each day that the violation continues. However, this civil penalty amount is adjusted annually for inflation. As of the time of publication of this FAQ, this amount is $591. A person who willfully violates the BOI reporting requirements may also be subject to criminal penalties of up to two years imprisonment and a fine of up to $10,000. Potential violations include willfully failing to file a beneficial ownership information report, willfully filing false beneficial ownership information, or willfully failing to correct or update previously reported beneficial ownership information.

FinCEN BOI Reporting is back on! However, for the immediate future, compliance is voluntary. STAY TUNED!

 

FinCEN Not Issuing Fines or Penalties in Connection with Beneficial Ownership Information Reporting Deadlines

Immediate Release

February 27, 2025

WASHINGTON––Today, FinCEN announced that it will not issue any fines or penalties or take any other enforcement actions against any companies based on any failure to file or update beneficial ownership information (BOI) reports pursuant to the Corporate Transparency Act by the current deadlines. No fines or penalties will be issued, and no enforcement actions will be taken, until a forthcoming interim final rule becomes effective and the new relevant due dates in the interim final rule have passed. This announcement continues Treasury’s commitment to reducing regulatory burden on businesses, as well as prioritizing under the Corporate Transparency Act reporting of BOI for those entities that pose the most significant law enforcement and national security risks.

No later than March 21, 2025, FinCEN intends to issue an interim final rule that extends BOI reporting deadlines, recognizing the need to provide new guidance and clarity as quickly as possible, while ensuring that BOI that is highly useful to important national security, intelligence, and law enforcement activities is reported.

FinCEN also intends to solicit public comment on potential revisions to existing BOI reporting requirements. FinCEN will consider those comments as part of a notice of proposed rulemaking anticipated to be issued later this year to minimize burden on small businesses while ensuring that BOI is highly useful to important national security, intelligence, and law enforcement activities, as well to determine what, if any, modifications to the deadlines referenced here should be considered.

Nationwide INJUNCTION against enforcement of BOI reporting requirements

Yesterday, December 3, 2024, the US District Court in the Eastern District of Texas issued an injunction against the US Attorney General prohibiting enforcement of the Treasury Department's "Financial Crimes Enforcement Network" BOI reporting requirements. (See posts below for a brief history of the CTA provisions applicable to most small businesses).  In Texas Top Cop Shop v. Garland, Judge Amos L. Mazzant issued a preliminary injunction against the Corporate Transparency Act (31 U.S.C. § 5336) (the “CTA”),

“[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.”

...

 “…the CTA, 31 U.S.C. § 5336, is hereby enjoined. Enforcement of the Reporting Rule, 31 C.F.R. 1010.380 is also hereby enjoined, and the compliance deadline is stayed under § 705 of the APA. Neither may be enforced, and reporting companies need not comply with the CTA’s January 1, 2025, BOI reporting deadline pending further order of the Court.”

Owners are still permitted to file the BOI report if they so choose.  The constitutionality of the CTA is already before the 11th Circuit Court of Appeals arising from NSBU v. Yellen, No. 24-10736 (11^th Cir.), and this matter may ultimately be determined by the United States Supreme Court.

Stay tuned! 

More Legal Challenges to FinCEN BOI Reporting

 From Thompson Reuters: 

Pushback Against Corporate Transparency Act Filing Requirements Continues

https://tax.thomsonreuters.com/news/pushback-against-corporate-transparency-act-filing-requirements-continues/

"On July 29, yet another case challenging the constitutionality of the Corporate Transparency Act was filed — this time in the US District Court for the District of Utah. (Taylor v. Yellen, No. 2:24-cv-00527) The case was brought by Utah business owner Phillip Taylor and the nonprofits The People Restored, Ranchers Cattlemen Action Legal Fund United Stockgrowers of America, and Utah OSR Land Cooperative. The plaintiffs’ complaint echoes those filed in other federal district courts that contend the Corporate Transparency Act violates plaintiffs’ Fourth Amendment rights against unreasonable search and seizure, privacy rights, and due process rights, and that Congress exceeded its authority in passing the law."

NEW Reporting Requirement for ALL ENTITIES in the US (unless exempt) - FinCEN BOI Report

 WHAT IS THIS NEW FINCEN BOI REPORTING ALL ABOUT?

The United States Government, Department of Treasury Financial Crimes Enforcement Network (FinCEN) is attempting to determine who owns which small business entities throughout the entire country. This effort is required by the Corporate Transparency Act (CTA) which was promulgated as part the larger National Defense Authorization Act of 2020 (NDAA). Congress passed the NDAA and overrode then-President Trump's veto of the act in January of 2021 with an effective date of January 1, 2024.

The Corporate Transparency Act requires business entities (each defined as a “reporting company”) to file, in the absence of an exemption, information on their “beneficial owners” with the Financial Crimes Enforcement Network (“FinCEN”) of the U.S. Department of Treasury (“Treasury”). The information is not supposed to be publicly available, but FinCEN is authorized to disclose filed information to U.S. federal law enforcement agencies, prosecutors, judges and other enforcement agencies and to financial institutions and their regulators.

*PLEASE NOTE: This legislation is new, the process is new, and there is substantial uncertainty as to how this will play out in practice. We will attempt to update information as it develops, but do NOT substitute this general discussion for specific information and advice from your legal and tax advisor(s).

Is my entity a “Reporting Company”?

Short answer: Yes, it probably is. Generally, any and all entities created by filing a document with a government office, (such as an LLC, corporation, LLP, association, and possibly an unincorporated association) is a “reporting company” and must comply with the CTA requirements. There are exemptions for large companies (20+ employees and $5M+ in gross receipts), banks, credit unions, insurance companies, certain types of tax-exempt entities, and several other exemptions that likely do not apply to you.

What is a Beneficial Ownership Information Report (BOIR)?

Each reporting company must identify for Dept of Treasury every “Beneficial Owner” including their “full legal name, date of birth, current residential address (or business address for a company applicant if in the business of forming entities), and an ‘identifying number’ and ‘image’ from documents like a U.S. Passport or driver's license along with information about the reporting company including its name, any dba, its address and its EIN.

Who is a “Beneficial Owner?”

A “beneficial owner” is not necessarily an owner of a reporting company. A “beneficial owner” is any individual who, directly or indirectly, (1) exercises substantial control over a reporting company or (2) owns or controls at least 25 percent of the ownership interests of the reporting company.

When must I file the FinCEN BOI Report?

The deadline depends upon when the reporting company was created. Companies created before January 1, 2024 have a deadline of January 1, 2025 to file a BOIR. Companies created between January 1, 2024, and January 1, 2025 have a deadline of 90 days after formation. Companies formed after January 1, 2025, have 30-days after creation to file the BOIR.

How is the FinCEN BOI Report filed?

There are two methods which can be used to file the BOIR, a .pdf filing version and an online form. Both are found at https://boiefiling.fincen.gov/fileboir.

What happens if I don't file?

Companies that fail to comply with the BOIR reporting requirements (filing a BOIR, updating a BOIR due to changes) face civil and criminal penalties, including fines and imprisonment. Individuals who willfully provide false or misleading information may also be subject to penalties. Any person violating the reporting requirements of the Corporate Transparency Act is liable for civil penalties of not more than $500 for each day that the violation continues and criminal penalties of imprisonment of up to two years and fines of up to $10,000. 31 U.S.C. § 5336(h)(3)(A).

Is this new FinCEN BOI reporting permanent?

There are likely to be challenges to the CTA including whether it is constitutionally permissible. As of the writing of this post, the law remains in effect, but one federal district court has ruled it unconstitutional and there are several other pending cases.

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See American Bar Association. “The Corporate Transparency Act—Preparing for the Federal Database of Beneficial Ownership Information.” https://www.americanbar.org/groups/business_law/resources/business-law-today/2021-may/the-corporate-transparency-act/

See US Dept of Treasury, An Introduction to Beneficial Ownership Information Reporting, https://www.fincen.gov/sites/default/files/shared/BOI-Informational-Brochure-April-2024.pdf