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While many of you were enjoying the holidays with your families, attorneys and tax professionals were focused on the ping pong that happened in court rulings involving reporting of Beneficial Ownership Interest (BOI) to the Financial Crimes Enforcement Network (FinCEN) by January 1, 2025. Early in December, a federal district court in Texas placed a nationwide injunction on the reporting, but a panel of judges on the Fifth Circuit Court of Appeals issued a stay on the injunction on Dec. 23. On Dec. 26, a merits panel of the Fifth Circuit reversed and vacated the stay. That deadline is on hold while the Justice Department seeks U.S. Supreme Court (SCOTUS) review on a nationwide injunction in the Texas Top Cop Shop case.
What is BOI Reporting
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. To learn more about the types of business entities impacted by the law, check out this bulletin by the Ohio State University. 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 that 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, 202,5 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, 20,24 had until Jan. 1, 2025, to register BOI with FinCEN.
Where Are We In Reporting?
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 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.
With the application by the federal government for a review by SCOTUS, it is essential to keep in mind changes may happen. Future developments may happen that you will need to stay informed of by working with a trusted attorney or tax professional, you will know if changes happen and filing is required.
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