By Neeraj Bhatia-
A Federal District Court has lifted the Beneficial Ownership Information (BOI) reporting injunction Feb. 18 and has set March 21 as the new deadline for Mandatory BOI filing.
Financial Crimes Enforcement Network (FinCEN) has now announced that for the vast majority of reporting companies, the new deadline to file an initial, updated, and/ or corrected BOI report is now March 21, 2025. However, reporting companies that were previously given a reporting deadline later than the March 21, 2025 deadline must file their initial BOI report by that later deadline (eg. Disaster relief extensions).
In a chain of see-saw decision-making, earlier on December 26, 2024, 3 days after lifting the injunction on BOI filing, the Fifth Circuit Court of Appeals had reversed its earlier order passed on December 23. On Thursday, December 26, the same Federal Court of Appeals had reinstated a nationwide injunction, which again halted the enforcement (BOI) reporting requirements to FinCEN. as the court was examining the merits of the case Texas Top Cop Shop, Inc. v. Garland pending before it.
Prior to that, on December 3, 2024, a federal district court ruling in the case of Texas Top Cop Shop, Inc. v. Garland had observed that the Corporate Transparency Act (CTA) was likely unconstitutional and temporarily halted its enforcement, including the BOI reporting requirements. This decision prohibited the FinCEN from enforcing BOI filing obligations during the case. The Department of Justice (DOJ) then appealed the ruling on December 5, 2024. On December 13, 2024, the Attorney General filed an emergency motion to stay the injunction. On December 23, 2024, the U.S. Court of Appeals for the Fifth Circuit granted the motion, lifting the district court’s preliminary injunction in the case Texas Top Cop Shop, Inc. v. Garland. This allowed FinCEN to resume enforcing the BOI reporting requirements while the Department of the Treasury’s appeal continues. Following this ruling that reinstated the reporting requirement, the Financial Crimes Enforcement Network (FinCEN) extended the deadline for most reporting companies to submit beneficial ownership information (BOI) reports to January 13, 2025, but then the Federal Court paused the enforcement by ordering an injunction on BOI filings.
FinCEN intends to extend the reporting deadline for all reporting companies 30 days from today, i.e. the date the stay on injunction is lifted
BACKGROUND OF BOI AS ENACTED BY CTA
Beneficial Ownership Information (BOI) reporting was enacted into law by the Corporate Transparency Act (CTA), which was passed by Congress in 2021 and became effective on January 1, 2024. The CTA requires certain legal entities to report identifying information about their owners and controllers to the Financial Crimes Enforcement Network (FinCEN). The CTA’s goal is to prevent the misuse of corporations and limited liability companies for criminal gain, such as money laundering, tax evasion, and terrorism financing. The BOI filing applies to certain types of corporations, limited liability companies, and other similar entities.
Who needs to file –
The following companies, called the “Reporting companies”, may be required to report:
Domestic reporting companies: These include corporations, LLCs, and other entities created by filing with a secretary of state in the US.
Foreign reporting companies: These include entities registered to do business in the US by filing with a secretary of state.
Information needed in the BOI Report:
Information about the Reporting Company:
- Full legal name of each beneficial owner.
- Any trade name or DBA name
- Current US address.
- State/ Jurisdiction of formation
- Employer’s Identification number of the entity (or Tax Identification number of the foreign reporting company)
Information about the Beneficial Owner(s)
Beneficial owner is any individual who directly or indirectly controls the business of Reporting company or who owns or controls at least 25% of that business’s ownership interests. The following information is required to be reported of each beneficial owner:
- Full legal name of each beneficial owner.
- Date of birth.
- Current residential address.
- Unique identification number, Passport or Driver’s license number along with copy of such unexpired document
Information about the Company applicants
Company applicants are the persons who directly filed the document that created a domestic reporting company, or the individual who directly filed the document that first registered a foreign reporting company. These also include individuals who were primarily responsible for directing or controlling the filing of the creation or first registration document.
A reporting company is required to report its company applicants if it is either a domestic reporting company created on or after January 1, 2024, or is a foreign reporting company first registered to do business in the United States on or after January 1, 2024. Each reporting company that is required to report company applicants will have to identify and report to FinCEN at least one company applicant, and at most two applicants who are individuals.
The information required to report in respect of the Company applicants is the same as that of required of Beneficial Owners.
Penalties for non-compliance:
The willful failure to report a complete or updated BOI report to FinCEN , or the willfully providing false or fraudulent BOI report may result in civil or criminal penalties as follows:
- Civil penalties up to $500 per day.
- Senior officers of an entity may be held accountable for that failure.
- Up to 2 years imprisonment and/ or fine up to $10,000.
Exemptions:
The Reporting Rule exempts twenty-three (23) specific types of entities from the reporting requirements. These include publicly traded companies, nonprofits, and certain large operating companies, Banks and other financial institutions, Investment company, investment or VC Fund advisers, Insurance companies, State-licensed insurance producers, accounting firms, certain utility companies, and inactive entities, among others.
Additionally, Large operating companies are also entitled to this exemption. For this purpose, an entity qualifies as a Large operating company if the entity employs more than 20 full-time employees in the United States, has an operating presence at a physical office in the US, has Gross receipts or sales of more than $ 5 million from sources within the US, as reported on its Federal Income Tax return.
Also, as outlined in the “Notice Regarding National Small Business United v. Yellen, No. 5:22-cv-01448 (N.D. Ala.)”, plaintiffs in National Small Business United v. Yellen—including Isaac Winkles, companies where Isaac Winkles is the beneficial owner or applicant, the National Small Business Association, and its members (as of March 1, 2024)—are not currently required to report their beneficial ownership information to FinCEN. In this different case, a federal district court in the Northern District of Alabama, , entered a final declaratory judgment, concluding that the Corporate Transparency Act (CTA) exceeds the Constitution’s limits on Congress’s power and enjoining the Department of the Treasury and FinCEN from enforcing the Corporate Transparency Act against the plaintiffs.
[Neeraj is a licensed attorney in California & CPA in California, New York and Colorado and a CA in India. He also has a LL.M. in International Taxation from the US, Costs and Works (Management) Accountancy, and a Bachelor (Honors) degree in Commerce from India. During his academic years he has received several awards and scholarships for being the top ranker nationally.]
