What You Need to Know About the Recent BOI Reporting Requirements Pause

January 10, 2025 | ,

The Financial Crimes Enforcement Network (FinCEN) is still operational, and you are permitted to enroll as a business owner. However, another pause in the enforcement of Beneficial Ownership Information (BOI) reporting requirements following a federal court order provided another sigh of relief for many business owners. For reporting companies and financial institutions, this legal back-and-forth has created uncertainty about compliance obligations. Here’s what you need to know about the latest developments and their implications.

Background: The Corporate Transparency Act and BOI Reporting

The Corporate Transparency Act (CTA), enacted in 2021, requires reporting companies to submit BOI to FinCEN. The goal is to combat illicit financial activity by increasing transparency in corporate ownership. However, this requirement has faced significant legal and practical challenges. Many believe it is just another attempt by our government to gain greater control and access to business owners.

On December 3, the U.S. District Court for the Eastern District of Texas issued a preliminary injunction to block the Treasury Department from enforcing the BOI reporting requirements because it is not constitutional. This move was in response to concerns about the potential burden on businesses and the legal implications of the mandate.

Later, on December 23, the U.S. Court of Appeals for the Fifth Circuit granted a stay of the district court’s injunction, effectively allowing FinCEN to enforce BOI reporting. However, just three days later, on December 26, another panel of the Fifth Circuit vacated the stay, reinstating the district court’s preliminary injunction.

What Does This Mean for Reporting Companies?

As of December 26, the injunction is back in effect, and reporting companies are not currently required to file BOI with FinCEN. However, FinCEN has clarified that companies may still voluntarily submit BOI reports if they choose.

Companies required to report are called reporting companies. There are two types of reporting companies:

• Domestic reporting companies are corporations, limited liability companies, and any other entities created by the filing of a document with a secretary of state or any similar office in the United States.

• Foreign reporting companies are entities (including corporations and limited liability companies) formed under the law of a foreign country that have registered to do business in the United States by the filing of a document with a secretary of state or any similar office.

Are any companies exempt from this reporting? Yes, 23 types of entities are exempt from the beneficial ownership information reporting requirements. These entities include publicly traded companies meeting specified requirements, many nonprofits, and certain large operating companies.

  1. Securities reporting issuer
  2. Governmental authority
  3. Bank
  4. Credit union
  5. Depository institution holding company
  6. Money services business
  7. Broker or dealer in securities
  8. Securities exchange or clearing agency
  9. Other Exchange Act registered entity
  10. Investment company or investment adviser
  11. Venture capital fund adviser
  12. Insurance company
  13. State-licensed insurance producer
  14. Commodity Exchange Act registered entity
  15. Accounting firm
  16. Public utility
  17. Financial market utility
  18. Pooled investment vehicle
  19. Tax-exempt entity
  20. Entity assisting a tax-exempt entity
  21. Large operating company
  22. Subsidiary of certain exempt entities
  23. Inactive entity

This back-and-forth has created a gray area for compliance. While the injunction remains in place, future court rulings could change the status quo. Reporting companies should stay informed about ongoing developments and be prepared to act if requirements are reinstated.

The Stance of NFIB (National Federation of Independent Businesses)

The NFIB has been vocal in its opposition and currently are involved in 40 legal cases in federal and state courts across the country and in the U.S. Supreme Court. If FinCEN and its BOI initiative are not fully repealed or found unconstitutional, 32 million small businesses throughout the country will once again be subjected to this burdensome statute, including the nearly 300,000 NFIB member businesses. So far, the NFIB has successfully moved quickly and effectively through the legal maze to prevent the BOI mandate.

What Should You Do Now?

  1. Monitor Legal Updates: The BOI reporting requirements remain in flux. Stay updated on any changes in the legal landscape that might impact compliance.
  2. Consider Voluntary Reporting: While not required, voluntary submission of BOI reports may demonstrate proactive compliance and help avoid future complications.
  3. Consult with Advisors: Work with legal and financial advisors to understand your obligations and develop a plan for potential BOI reporting requirements.
  4. Advocate for Change: Businesses and financial institutions should engage with policymakers to advocate for practical, balanced solutions to corporate transparency requirements.

Looking Ahead

The BOI reporting requirements under the Corporate Transparency Act represent a significant shift in how corporate ownership is tracked in the United States. While the current injunction provides temporary relief, the long-term outlook remains uncertain.

For now, businesses should focus on staying informed and prepared while advocating for fair and effective regulations.

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