December 20, 2024

RE: Latest Information on Beneficial Ownership Information Reporting

As reported to you in our January email alert, beginning January 1, 2024, a significant number of businesses are required to comply with the Corporate Transparency Act (CTA). The CTA requires the disclosure of the beneficial ownership information (otherwise known as “BOI”) of certain entities from people who own or control a company. We had encouraged you to review the reporting requirements at the link below, as this impacts many businesses, including passthrough entities.

A reporting company created or registered to do business before January 1, 2024, has until January 1, 2025 to file its initial beneficial ownership information report. A reporting company created or registered on or after January 1, 2024, and before January 1, 2025, has 90 calendar days after receiving notice of the company’s creation or registration to file its initial BOI report.

The intent of the BOI reporting requirement is to help US law enforcement combat money laundering, the financing of terrorism and other illicit activity. The CTA is not a part of the tax code. Instead, it is a part of the Bank Secrecy Act, a set of federal laws that require record-keeping and report filing on certain types of financial transactions. Under the CTA, BOI reports will not be filed with the IRS, but with the Financial Crimes Enforcement Network (FinCEN), another agency of the Department of Treasury.

That said, there are recent developments which throw this reporting requirement into question.

1. In response to the federal district court’s decision in Texas Top Cop Shop, Inc. vs. Garland to place a nationwide preliminary injunction preventing enforcement of the Corporate Transparency Act (CTA), the Treasury’s Financial Crimes Enforcement Network (FinCEN) has alerted on its Beneficial Ownership Information (BOI) webpage that companies are currently not required to file the BOI reports and will not be subject to liability if they fail to report while the order remains in force. The nationwide preliminary injunction enjoins the CTA, including the enforcement of that statute and regulations implementing its BOI reporting requirements, and stays all deadlines to comply with the CTA’s reporting requirements. Companies may still voluntarily submit BOI reports, and many experts are taking the position that filing the reports is the correct course of action. On behalf of the Department of the Treasury, the Department of Justice filed a Notice of Appeal after the court’s order.
2. The Attorney General has filed an emergency motion to stay the injunction preventing FinCEN from enforcing BOI reporting requirements. This motion could result in the injunction being lifted by December 27, reinstating the January 1 filing deadline. If this happens, FinCEN will enforce the deadline as planned.
3. Most recently, Congress presented a continuing resolution which, if passed, includes a measure to extend by one year the deadline for existing entities to report their beneficial ownership information.

We will continue to share information on this as it develops.

Below is a link to the Financial Crimes Enforcement Network’s guidance on this reporting requirement.

Small Business Resources | FinCEN.gov

 The information to be reported arises from determinations that are primarily legal in nature. As WebsterRogers is not engaged in the practice of law, we are not able to assist in preparing or submitting this report. We encourage you to consult with your legal counsel as to the advisability of filing this now. If you do not have legal counsel, there are various service providers offering assistance with BOI reporting. Please call your contact at WebsterRogers if you would like more information.