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As I mentioned in an earlier post, the U.S. Supreme Court was asked to review the injunction granted by the 5th Circuit related to Beneficial Ownership Interest (BOI) reporting required under the Corporate Transparency Act. On January 23, 2025, the Supreme Court granted a stay in that injunction pending oral arguments before the 5th Circuit on March 25, 2015. On January 24, 2025, the Financial Crimes Enforcement Network (FinCEN) issued guidance that although that injunction was lifted, another nationwide injunction still exists. At this point, FinCEN is only requiring voluntary submissions of BOI reporting.
The second nationwide injunction that was not a part of the Supreme Court’s stay is in Smith v. U.S. Department of the Treasury, No. 6:24-CV-336-JDK, 2025 WL 41924 (E.D. Tex. Jan. 7, 2025). The U.S. Justice Department or U.S. Department of Treasury has not appealed that ruling. We will have to wait to see the new Administration's direction in appealing this decision or what the new Congress will do with potential legislative solutions. Only voluntary submissions are required, and no deadlines or penalty enforcement are happening.
The Corporate Transparency Act was created intending to prevent money laundering, illicit financial transactions, and financial terrorism. As a part of the law, FinCEN was created in the Department of the Treasury to create a national database of business entities and owners of those business entities that are not subject to regular public disclosure laws. This database required beneficial owners of businesses to disclose certain information. It is important to note that the law does not create exemptions for farms or other small businesses. Only certain larger businesses that met requirements were exempt.
It's important to note the law only impacted those businesses that had filed documentation with the state, such as S corps, C corps, limited liability companies, and limited partnerships. Sole proprietorships and general partnerships did not have to file BOI with FinCEN. New entities created after January 1, 2024, but before Jan. 1, 2025, had 90 days to file BOI with FinCEN after receiving notification of the entity's registration with their state. New business entities created after January 1, 2025, had 30 days to file BOI with FinCEN after receiving notification of the entity's registration with their state. All entities created before Jan. 1, 2024, had until Jan. 1, 2025, to register BOI with FinCEN.
As mentioned earlier, this reporting is currently on hold pending the review requested by the federal government related to the injunction put in place by the federal district court in Texas. Department of Treasury still encourages businesses covered by the law to file during this period, but it is not required.
For those who have not filed, you should still have the documents ready to go if the injunction is lifted. Department of Treasury will provide those businesses that need to file by January 1, 2025, an opportunity to file before enforcing penalties. This means having the full legal names, addresses, birthdays, and a copy of either a state-issued driver's license, passport, or identification card issued by the state, local government, or tribal government for all owners in the business. This filing can be done here or by working through your attorney or tax professional to file on your company’s behalf.
If the injunction is lifted, this filing is not a one-time event. The company would need to update the filing each time ownership changes (such as a member of the LLC leaving or a new member being added). Companies would have 30 days to file after the date of the change is complete. At the same time, if the business changes its name, it is doing business as or changes in the Chief Executive Officer or Managing Member need to be filed with FinCEN no later than 30 days after the change is complete.
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