Business owners are watching a back-and-forth battle that’s become tougher than playing tennis against Coco Gauff, and neither side is backing down. The two opponents? Business owners (specifically a Texas gun shop, the National Small Business Association and the state of Alabama) versus the Financial Crimes Enforcement Network (FinCEN), a bureau of the U.S. Department of the Treasury (USDOT). What are they debating about? Nationwide business owners being required to file the Beneficial Ownership Information Report (BOIR) before January 1, 2025 in order to avoid a $591 fine, criminal penalties of up to two years in prison and repeat offenses that could lead to them owing $10K.
What Is The Beneficial Ownership Information Report (BOIR)?
Effective January 1, 2024, many companies in the United States must report information about their beneficial owners (the people who own or control their companies) to FinCEN, a bureau of USDOT. Filing is free and a onetime occurrence in order to follow the Corporate Transparency Act (CTA). The only time a company would need to refile is to update or correct information if beneficial owners change.
What Is The Corporate Transparency Act (CTA)?
In 2021, Congress passed the CTA on a bipartisan basis. This law creates a new beneficial ownership information reporting requirement to help the federal government better identify “bad actors” who hide or benefit from ill-gotten gains. These “bad actors” will often use incognito tactics to do business under other organizations.
What Happens If You Opt Out Of Filing By January 1, 2025?
Before the Texas lawsuit (more on that later), a person (or company) who willfully violates the BOI reporting requirements would be subject to civil penalties of $591 each day that the violation continues. However, this civil penalty amount is adjusted annually for inflation. The primary goal is to prevent and combat money laundering, tax fraud and other financial crimes.
Who Is Required To File The BOIR?
A wide assortment of companies (approximately 32.5 million in the U.S.) are required to file the free BOIR. If your domestic or foreign company fits any of the following categories, you’re required to file:
- Corporations
- Limited liability companies (LLCs)
- Entities that file with the Secretary of State (or similar offices) (ex. homeowners associations, condo associations)
- Foreign corporations that have registered to do business in the United States
- Foreign LLCs that file with the Secretary of State (or similar offices)
When Do We Have To File The BOIR?
FinCEN began accepting reports on January 1, 2024 with a final deadline of January 1, 2025. (This may change. More on that later in the post.) You cannot file a BOI by postal mail, only online in two ways: prepare and submit the report online, or download and fill out the PDF to then upload onto the FinCEN site.
If your company is created or registered in 2024, you must report BOI within 90 calendar days after receiving actual or public notice that your company’s creation or registration is effective (whichever is earlier). If your company is created or registered on or after January 1, 2025, you must file BOI within 30 calendar days after receiving actual or public notice that its creation or registration is effective. Any updates or corrections after that initial, free filing should be submitted to FinCEN within 30 days.
Are Companies Involved In Hurricanes Required To Follow The Same Deadline?
FinCEN already issued five notices extending the filing deadlines to submit BOI reports for reporting companies affected by Hurricane Milton, Hurricane Helene, Hurricane Debby, Hurricane Beryl, and Hurricane Francine.
Who Is Exempt From Filing The BOIR?
There are 23 types of entities that are exempt from the reporting requirements. These entities include publicly traded companies, various nonprofits and some large operating companies. Examples of exempt organizations include accounting firms, banks, credit unions, investment advisers, insurance companies and public utility companies.
Why Is Alabama And The National Small Business Association Exempt From Filing The BOIR?
On March 1, a federal district judge in Alabama ruled that the BOI reporting required under the CTA is an “unconstitutional exercise of Congress’s enumerated powers.” In addition to that entire state, the judge granted summary judgment to the plaintiffs in the case of National Small Business United d/b/a the National Small Business Association, et al v. Janet Yellen (Case No. 5:22-cv-1448-LCB). Members of the NSBA who joined on or before March 1, 2024 do not have to file the BOIR.
Is This Filing Still Enforceable With President Trump Now In the White House?
On December 3, 2024, a Texas-based federal court issued a nationwide order prohibiting the federal government from enforcing the CTA after hearing the lawsuit Texas Top Cop Shop, Inc., et al. v. Garland, et al., Case No. 4:24-cv-478 (E.D. Tex.). The Court held that the CTA was “likely unconstitutional” and disclosing beneficial ownership information “would irreparably harm reporting companies if they were forced to comply.” As of last week, neither the Act nor its fines may be enforced. The Texas Court judgment believes that “forcing reporting companies to comply with the CTA substantially threatens their constitutional rights.” The Court expanded their ruling to companies nationwide, not just in Texas.
During Christmas week of 2024 and New Year’s Week of 2025, additional changes were made after the Department of the Treasury appealed this order. On December 23, 2024, the U.S. Court of Appeals for the Fifth Circuit granted the U.S. government’s request for an emergency stay to continue with the filings. This meant that companies who hadn’t filed already were required to do so by January 13, 2025 (instead of the original deadline of January 1, 2025). Although the Fifth Circuit court voted in FinCEN’s favor, right before the new year, on December 30, 2024, the merits panel of the Fifth Circuit vacated that previous stay. And now with President-Elect Donald Trump headed to the White House and a Republican-led Congress, the attorneys general in 25 Republican-led states have filed a brief with the U.S. Supreme Court defending a court injunction against enforcement of the CTA altogether.
On January 23, 2025, just a few days after Trump returned to the White House, the Supreme Court granted an emergency plea made by the Justice Department to allow continued enforcement of the CTA, enacted in 2021 to crack down on the illicit use of anonymous shell companies.
Ketanji Brown-Jackson stated the following about why the Supreme Court won’t block the CTA nationwide (the way it has been blocked for business owners in Alabama):
“I see no need for this Court to step in now for at least two reasons. First, the Fifth Circuit has expedited its consideration of the Government’s appeal. Second, the Government deferred implementation on its own accord — setting an enforcement date of nearly four years after Congress enacted the law — despite the fact that the harms it now says warrant our involvement were likely to occur during that period. The Government has provided no indication that injury of a more serious or significant nature would result if the Act’s implementation is further delayed while the litigation proceeds in the lower courts. I would therefore deny the application and permit the appellate process to run its course.”
In simpler terms, the Supreme Court wants litigation to happen at its usual pace instead of trying to fast-track it straight to the Supreme Court. Additionally, there’s been no proven injury to warrant freezing LLCs, corporations and other small businesses from voluntarily filing their own BOIRs. The irony is that during Trump’s first term as president, the House had already passed its own version of the CTA in late 2019 with a vote of 249 to 173. However, Trump did try to veto the Defense Bill on December 23, 2020 after it was initially passed by Congress. The CTA was included within that defense bill, but Trump wanted to veto the bill for unrelated reasons. Still, the U.S. House of Representatives voted to override the presidential veto by a super majority margin of 322-87 on December 28, 2020, and the U.S. Senate voted to override the presidential veto by a super majority margin of 81-13 on January 1.
In 2025, the Trump administration has not opposed enforcing the registration requirement, although Republican-led states and lawmakers, as well as conservative and business interest groups, have been massively fighting against the BOIR since its original deadline was set for January 1, 2025.
Should LLCs, Corporations And Foreign Businesses File The BOIR Even With All the Back-And-Forth?
Although Trump had a pile full of executive orders, including ending birthright citizenship; freezing diversity, equity and inclusion (DEI) programs; and sending federal employees home who work for DEI programs, the BOIR was not one of Trump’s executive orders on January 20. Owners and part-owners of an estimated 32.6 million small businesses can still voluntarily register with FinCEN. However, while litigation continues in lower courts, businesses who opt out will not have to abide by the deadline, and will not be fined $591 in civil penalties nor up to $10,000 in fines and two years of imprisonment for criminal penalties.
