BOI Injunction Lifted

Beneficial Ownership Reporting Deadline Reinstated for January 1, 2025

The deadline for companies to file beneficial ownership information (BOI) reports has been reinstated, with the initial compliance date set for January 1, 2025. This development follows a decision by the Fifth Circuit Court of Appeals to lift an injunction that had previously delayed enforcement of the Corporate Transparency Act (CTA) and its BOI reporting requirements.

Background on the Legal Challenges

The injunction, issued in the Texas Top Cop Shop, Inc. v. Garland case, temporarily blocked enforcement of the CTA and exempted reporting companies from meeting the January 1, 2025 deadline. However, the Department of Justice (DOJ) swiftly appealed this ruling, urging the Fifth Circuit to resolve the matter promptly to ensure regulated entities are aware of their obligations. In its decision to lift the injunction, the Fifth Circuit noted that the government demonstrated a strong likelihood of successfully defending the constitutionality of the CTA.

While the case continues to be litigated, reporting companies should prepare to comply with the reinstated deadline unless further court actions alter the requirements.

Congressional Efforts and Advocacy

The American Institute of CPAs (AICPA) and state CPA societies have actively lobbied Congress and the Financial Crimes Enforcement Network (FinCEN) for a delay in the BOI reporting requirements. A one-year extension was included in a proposed spending bill; however, the final version passed by Congress did not include this provision. The AICPA has emphasized the need for clarity and support for businesses navigating these new compliance obligations.

FinCEN’s Role and Guidance

FinCEN, the agency responsible for enforcing the CTA, issued an alert following the initial injunction. The alert clarified that reporting companies were not required to file BOI reports during the injunction but could voluntarily submit information if desired. Now that the injunction has been lifted, companies must comply with the January 1, 2025, deadline to avoid penalties.

FinCEN also noted that the Texas case is one of several ongoing legal challenges to the CTA. District courts in Virginia and Oregon have denied similar injunction requests, aligning with the government’s position that the CTA is constitutional. Despite the legal disputes, the government’s stance on the CTA’s validity remains firm.

Overview of the Corporate Transparency Act

Enacted in 2021 as part of an anti-money laundering initiative, the CTA requires reporting companies to disclose the identities and information of their beneficial owners. For entities formed after January 1, 2024, the reporting requirements also extend to “applicants”—individuals responsible for filing incorporation documents for corporations, LLCs, or similar entities.

What Businesses Should Do Next

With the January 1, 2025, deadline back in effect, businesses should take immediate steps to ensure compliance:

1. Identify Beneficial Owners: Determine which individuals meet the criteria for beneficial ownership under the CTA.

2. Gather Required Information: Collect the necessary details for each beneficial owner, such as name, date of birth, and address.

3. Monitor Updates: Stay informed through trusted sources like the AICPA’s BOI reporting resource center and FinCEN alerts.

4. Consult Professionals: Work with tax and legal advisors to navigate the reporting process and mitigate potential risks.

By taking proactive measures, companies can better navigate the complexities of BOI reporting and avoid compliance pitfalls.