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BOI is back, now what? Understanding the Corporate Transparency Act (CTA) and Beneficial Ownership Information (BOI) Reporting Requirements

What is the CTA?

The Corporate Transparency Act (CTA) was enacted in 2021 to combat money laundering, tax fraud, and illicit financial activities. The law requires U.S. businesses to disclose information about their Beneficial Owners to the Financial Crimes Enforcement Network (FinCEN), a division of the U.S. Department of the Treasury. This information is stored in a secure database accessible only to authorized government agencies.

Who is a BOI?

Beneficial Ownership Information (BOI) refers to details about individuals who own or exercise significant control over a company. Under the CTA, a beneficial owner is someone who:

  • Anyone with direct or indirect influence over the company, including individuals who own or control at least 25% of your company. Ownership interest includes equity, stock, or voting rights; a capital or profit interest; convertible instruments; options or other non-binding privileges to buy or sell any of the foregoing; and any other instrument, contract, or other mechanism used to establish ownership.
  • Exercises substantial control over the company, such as a CEO, CFO, General Counsel, or Board Member. It also includes those who can appoint or remove a senior officer of your company or act as the beneficial owner’s nominee, intermediary, custodian, or agent.

Who Needs to File a BOI Report?

Companies required to file a BOI report include corporations, limited liability companies (LLCs), and similar entities created through state registration. However, 23 types of entities are exempt, including publicly traded companies, banks, insurance companies, financial institutions, and certain nonprofits. Please note that the large operating companies exemption generally does not apply to Puerto Rico as they do not file federal taxes unless they have US-sourced income. Similarly, Puerto Rico non-for-profit companies that are not registered federally as exempt entities do not qualify for the tax-exempt entity exemption.

BOI Filing Deadlines per CTA

The CTA established the following filing deadlines depending on when a company was formed:

  • Companies formed before January 1, 2024: Must file by January 1, 2025.
  • Companies formed in 2024: Must file within 90 days of registration.
  • Companies formed on or after January 1, 2025: Must file within 30 days of registration.

However, the deadlines have shifted for some due to multiple legal actions filed.

Legal Uncertainty: Multiple Injunctions and Appeals

There was much drama regarding the applicable deadlines for the BOI reporting in 2024 and early 2025. Due to multiple injunctions issued by federal courts, there has been significant legal uncertainty surrounding the enforcement of the CTA. Here is a summary of the most relevant cases.

  • National Small Business United v. Yellen, No. 5:22-cv-01448 (N.D. Ala.): On March 1, 2024, a federal district court in the Northern District of Alabama ruled that the Corporate Transparency Act exceeds Congress’s constitutional authority and enjoined the Department of the Treasury and FinCEN from enforcing the Act against the plaintiffs. The DOJ filed a Notice of Appeal on March 11, 2024. FinCEN is complying with the ruling, and the government is not currently enforcing the CTA against the plaintiffs, which include Isaac Winkles, reporting companies for which he is a beneficial owner or applicant, the National Small Business Association, and its members as of March 1, 2024.
  • Texas Top Cop Shop, Inc. v. Garland, No. 4:24-CV-478 (E.D. Tex.): On December 3, 2024, a federal district court found that the CTA was likely unconstitutional and issued a nationwide injunction prohibiting its enforcement. The DOJ appealed, and on December 23, 2024, the Fifth Circuit lifted the injunction. However, a different panel in the Fifth Circuit reinstated the injunction on December 27, 2024. On December 31, the DOJ filed a writ of certiorari to the Supreme Court. On January 23, 2025, the U.S. Supreme Court issued an order staying the injunction, allowing enforcement of the CTA while litigation continues. The Supreme Court’s decision, however, did not fully reinstate the CTA due to the Smith case ruling (next one).
  • Smith, et al. v. U.S. Department of the Treasury, et al., 6:24-cv-00336 (E.D. Tex.): On January 7, 2025, the U.S. District Court for the Eastern District of Texas issued an order staying FinCEN’s regulations, blocking the BOI reporting requirements. However, on February 5, 2025, the U.S. Department of Justice (DOJ) filed an appeal and requested a stay of the order during the appeal process. On February 18, 2025, the court agreed to stay its earlier decision, effectively allowing BOI reporting requirements to resume while the appeal is ongoing.
  • At the appellate level, in addition to Texas Top Cop Shop, appeals are pending in the U.S. Courts of Appeals for the Eleventh, Ninth, and Fourth Circuits in National Small Business United v. Yellen, Firestone v. Yellen, and Community Associations Institute v. Yellen, respectively. Only National Small Business United involved injunctive relief, which was restricted to the parties in that case.

Penalties for Non-Compliance

Given these developments, FinCEN’s regulations implementing the BOI reporting requirements are no longer stayed, and compliance is now mandatory. However, FinCEN is providing additional time for companies to report. FinCEN advised that for most reporting companies, the new deadline for companies created between December 3, 2024, and February 18, 2025, to file an initial, updated, and/or corrected BOI report is now March 21, 2025.  While it has not been explicitly clarified, per CTA any entity created on or after February 20, 2025, will have 30 days to file to file the BOI.

Failure to comply with the BOI reporting requirements can result in severe penalties:

  • Civil fines of $591 per day (adjusted for inflation) for ongoing violations.
  • Criminal penalties of up to $10,000 in fines and two years in prison for willful non-compliance.

Note: Changes to beneficial ownership must be reported within 30 days. Failure to update your BOI report could result in penalties.

What Information is Required in a BOI Report?

To file a BOI report, companies must submit the following details:

  • Company Information: Legal name, trade names, principal business address, and tax identification number.
  • Beneficial Owner Information: Name, date of birth, residential address, and an identification document (such as a passport or driver’s license). Note that if the information is related to a minor, you must provide the information of the parents or legal guardians.
  • Company Applicant Information: (Only for entities formed after January 1, 2024) Details of the individual responsible for registering the business.

 

Need Help Filing Your BOI Report?

Avoid penalties and ensure compliance with FinCEN regulations by filing your BOI report on time. We provide professional assistance to make the filing process stress-free. Contact us today to handle your BOI filing quickly and accurately!

Disclaimer

This post provides general information and does not constitute legal advice. Consult with legal counsel before making any decisions based on this information. Accessing or using this post does not establish an attorney-client relationship between us.