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Federal Corporate Transparency Act: Update

Posted on: 12-17-2024 by Floor Covering Media

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BOI e-Filing Alert:

Updated: March 2, 2025

Update about BOI Reports: The U.S. 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. Treasury takes this step in the interest of supporting hard-working American taxpayers and small businesses and ensuring that the rule is appropriately tailored to advance the public interest. “This is a victory for common sense,” said U.S. Secretary of the Treasury Scott Bessent. “Today’s action is part of President Trump’s bold agenda to unleash American prosperity by reining in burdensome regulations, in particular for small businesses that are the backbone of the American economy.” Press Release

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BOI e-Filing Alert:

Updated: March 1, 2025

SUMMARY

Given the current deadline for most reporting companies to file their initial Beneficial Ownership Information (BOI) reports was set for March 21, 2025, the potential consequences of the Corporate Transparency Act (CTA) appeal not being resolved by the deadline are as follows:

Legal uncertainty:

Reporting companies may face continued uncertainty about their obligations under the CTA, as the legal status of the reporting requirements remains in flux.

Compliance challenges:

Companies may struggle to determine whether they need to comply with the CTA requirements, potentially leading to inadvertent non-compliance or unnecessary reporting.

Potential for last-minute scramble:

If the appeal is resolved close to or after the deadline, reporting companies may face a sudden rush to comply with little preparation time.

Possible deadline extensions:

FinCEN may consider extending compliance deadlines or modifying reporting requirements to accommodate the ongoing legal challenges.

Prioritized reporting:

FinCEN might implement a system to prioritize reporting for entities posing significant national security risks while providing relief to lower-risk entities.

Potential rule amendments:

FinCEN may assess options to amend the Final Rule governing CTA implementation, which could alter reporting obligations.

Continued voluntary reporting:

Some companies may choose to submit BOI reports voluntarily, even if not currently required, to avoid potential future compliance issues.

Risk of penalties:

While FinCEN is likely to exercise restraint in assessing penalties for minor violations, companies that intentionally fail to comply once requirements are reinstated could face civil and criminal penalties.

Ongoing monitoring required:

Reporting companies will need to closely follow developments in the CTA litigation and FinCEN updates to stay informed about their evolving obligations.

Possible legislative intervention:

Congress may introduce legislation to delay the CTA's effectiveness or repeal it entirely, adding another layer of uncertainty to the situation.

BOI e-Filing Alert:

Updated: February 2025

Following recent legal developments regarding the Corporate Transparency Act (CTA), the previously vacated BOI reporting rule is now back in effect with a new enforcement window after another court lifted the injunction blocking it.

Recent legal actions: A federal court initially blocked enforcement of the CTA. However, this injunction was later lifted, allowing BOI reporting to resume. Appeal process: The government is still appealing the court decision in the Fifth Circuit although the reporting requirements are currently in effect pending the outcome of the appeal at some point in the future (see schedule).

New deadline: Most if not all reporting companies formed or registered after January 1, 2024, must file initial BOI reports no later than March 21, 2025. Extended deadline: Most if not all reporting companies formed or registered before January 1, 2024 must file their initial BOI reports by January 1, 2026 according to HR736 and S505, which have passed the house and the senate.

BOI e-Filing Alert:

Updated: January 2025

A federal appeals court has issued a ruling that suspends the requirement for businesses to file reports about their beneficial ownership information (BOI). The U.S. Treasury Department's Financial Crimes Enforcement Network (AKA: FinCen) recently announced that "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."

The BOI requirements imposed under the Corporate Transparency Act (CTA) are intended to to help prevent criminals from using businesses for illicit activities, such as money laundering and fraud; an act mandating that many small businesses provide information to FinCen about its beneficial owners or the individuals who own or control the business. Failure to submit BOI reports by the specified deadline would have resulted in civil penalties or criminal penalties or both. FinCen estimated in the first year that these reporting rules when imposed would have otherwise affected about 32.6 million companies.

The Department of the Treasury is appealing the court order. The Fifth Circuit announced a schedule to address the weighty substantiave arguments of the appeal at some point in February 2025. Clearly, this complex matter remains unresolved. In the interim, the reporting companies are not required to file a report and are not subject to liability if they fail to do so while the applicable order remains in force. There may even be pending legislation repealing the reporting requirements with the next administration; learn more at FinCen.gov.

As the 2024 tax year approaches its last days, business owners must learn about the Federal Corporate Transparency Act. It is a federal reporting obligation for organizations. It requires identifying the beneficial owners and the important decision makers. The Financial Crimes Enforcement Network, which is a bureau in the U.S. Department of the Treasury, collects the data.

Entities formed in United States of America; registered with a secretary of state or a similar office under laws of the State, Native American Tribe and even foreign companies; registered to conduct business within the United States of America must comply with the new federal reporting requirements. The time to do so is running out! So, it would be wise to act sooner than later.

The federal government wants to identify the owners and the beneficial owners of organizations doing business within our borders. The information will be used to protect national security; making it easier to find corruption, money laundering operations, tax evasion, drug trafficking organizations and other unlawful activity. Information will be shared with approved agencies including federal law enforcement, state law enforcement and tax authorities.

As the report is submitted, remember to identify the owners, beneficial owners and submit visual proof of each owner’s identity. Acceptable forms of ID include State-issued driver licenses and passports. There are daily fines for potential errors and omissions on the submited form and expensive penalties for non-compliance including fines up to $5,000.00 for each defined violation.

Notably, not every business is required to file a BOI Report and are exempt from filing a report for unspecified reasons. Carefully review a categorical list of certain types of entities possibly exempt from BOI reporting requirements:

Accounting Firms

Banks

Broker or Dealer in Securities

Certain Businesses formed under the laws of a foreign country

Commodity Exchange Act Registered Entity

Credit Unions

Depository Institution Holding Company

Entity assisting a Tax-Exempt Entity

Financial Market Utility

Governmental Authority

Inactive Entity

Insurance Company

Investment Company or Investment Advisor

Large Operating Company

Money Services Business

Other Exchange Act Registered Entity

Pooled Investment Vehicle

Public Utility

Securities Exchange or Clearing Agency

Securities Reporting Issuer

State-Licensed Insurance Producer

Subsidiary of Certain Exempt Entities

Tax-Exempt Entity

Venture Capital Fund Adviser

Curiously, the stated purpose of enacting the CTA is to fight financial crimes. It was intended to prevent criminals from using businesses for illicit activities, such as money laundering and fraud, by mandating many small businesses provide this information to FinCen about their owners and beneficial owners; the individuals who ultimately own the business or who control the business.

It would appear that the entities granted an exemption are either directly or indirectly associated with the finance market and the non-exempt entities that are required to file BOI Reports aren't associated with the finance market. There must be a reason for granting exemptions to the types of entities listed above for unspecified reasons. Regardless, the fact remains it's necessary for all entities not granted an exemption to file a BOI Report before the deadline.

Complete the form, submit it and take a screenshot of the confirmation page. Save this screenshot and supplied documents in the event you are required to provide proof of filing this important report. Remember to report any changes.

Learn more at the website:

Where to file BOI Reports:
https://www.fincen.gov/boi

BOI Form Filing Instructions:

Access the form by going to

FinCEN's E-Filing Website:

https://boiefiling.fincen.gov

Click the “File BOIR” button.
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