Beneficial Ownership Information (BOI) Reporting: Rules and Federal Injunction
To combat financial crimes like money laundering, fraud, and tax evasion, the U.S. Congress passed the Corporate Transparency Act (CTA), which requires certain businesses to report Beneficial Ownership Information (BOI). This law, administered by the U.S. Department of Treasury’s Financial Crimes Enforcement Network (FinCEN), aims to create greater transparency in the corporate landscape. Here’s what you need to know about BOI reporting, including the recent federal injunction that temporarily blocks enforcement.
What is BOI Reporting?
BOI reporting is the disclosure of information about individuals who directly or indirectly own or control a business. The data collected is intended to help authorities prevent and investigate illicit financial activities.
What Must Be Reported?
When filing a BOI report, businesses must provide the following information for each beneficial owner:
- Full legal name
- Date of birth
- Current street address
- Unique identifying number from an acceptable ID document, such as a passport or driver’s license
- A copy of the ID document
Who Must File BOI Reports?
Under the CTA, most corporations, limited liability companies (LLCs), and similar entities created by filing documents with a state or tribal authority are required to file BOI reports. However, there are key exemptions that generally exclude larger, regulated, or publicly traded entities.
Businesses Required to File
- Small, privately held entities: Including single-member LLCs, sole proprietorships registered as LLCs or corporations, and small partnerships.
Businesses Exempt from Filing
Certain entities are exempt, including:
- Large companies that meet all three criteria:
- More than 20 full-time employees in the U.S.
- Over $5 million in gross receipts or sales from U.S. operations.
- A physical operating presence in the U.S.
- Publicly traded companies are already reporting to the SEC.
- Highly regulated entities such as banks, credit unions, and insurance companies.
- Inactive businesses with no activity, assets, or ownership changes for over a year.
Deadlines for BOI Filing
The BOI reporting requirement took effect on January 1, 2024. Filing deadlines depend on when the business was created:
- Businesses formed before January 1, 2024: Must file by January 1, 2025.
- Businesses formed in 2024: Must file within 90 days of formation.
- Businesses formed on or after January 1, 2025: Must file within 30 days of formation.
Penalties for Non-Compliance
Failure to comply with BOI reporting requirements can result in severe penalties, including significant fines and possible criminal charges. However, recent legal developments have temporarily paused enforcement.
The Federal Injunction and Its Impact
On December 3, 2024, the U.S. District Court for the Eastern District of Texas issued a nationwide preliminary injunction in the case of Texas Top Cop Shop, Inc. v. Garland. This injunction temporarily halts the enforcement of the CTA, including its BOI reporting rules and deadlines, citing potential constitutional concerns.
In response, the U.S. Department of Justice (DOJ) filed an emergency motion on December 13, 2024, with the U.S. Court of Appeals for the Fifth Circuit, seeking to stay the injunction pending appeal. On December 27, 2024, the Fifth Circuit reinstated the injunction, confirming that the CTA’s reporting requirements remain suspended.
In light of these developments, FinCEN announced that, while the injunction is in effect, reporting companies are not required to file BOI reports and will not face liability for non-compliance during this period. However, voluntary submissions are still accepted.
Key Takeaways for Businesses
- Monitor the Injunction: The injunction is temporary, and businesses should stay informed about its status and any updates from FinCEN.
- Prepare for Compliance: Despite the pause, businesses should begin gathering the necessary information to ensure timely compliance if the injunction is lifted.
- Seek Professional Guidance: For businesses unsure of their obligations or exemptions, consulting with legal or compliance experts is strongly recommended.
The CTA’s BOI reporting rules mark a significant shift in corporate transparency requirements. While the current injunction offers a reprieve, businesses should remain proactive in understanding their responsibilities and preparing for future compliance.
If this regulation applies to your business, it is essential to revisit the information, seek professional advice, and ensure you are ready to meet the requirements once enforcement resumes.
For more information, visit https://fincen.gov/boi
