Source: Bradford Tax Institute

On December 3, 2024, a Texas federal district court ruled that if you did not file your FinCEN BOI report during the court’s injunction, you could not be penalized by FinCEN. (This indefinitely delayed the January 1, 2025, filing deadline and all other deadlines.)

On December 23, 2024, the Fifth Circuit Court of Appeals ruled to overturn the Texas injunction and immediately reinstate the FinCEN BOI filing requirements. (This reinstated the January 1, 2025, and all other deadlines.)

Later that same day, FinCEN extended the January 1, 2025, filing date to January 13, 2025, and extended all other deadlines for a short time.

On December 26, 2024, the Fifth Circuit vacated its stay on the Texas court’s injunction. (This puts the injunction back in place and means you cannot be penalized during the injunction period for not filing your BOI reports.)

Effect on Filing Reports

Reporting companies are not currently required to file beneficial ownership information with FinCEN and are not subject to penalties for not filing while the injunction remains in force.

The injunction applies to:

• reporting companies that existed on January 1, 2024, and had a reporting date of January 1, 2025;
• new reporting companies formed in 2024 that had an upcoming 90-day deadline to file their BOI reports;
• companies that filed and had a reportable change that required a revised report within 30 days; and
• reporting companies that will be formed in 2025 and would have had a 30-day reporting deadline.

FinCEN has posted an alert on its website that BOI filings are not required while the injunction remains in effect, but you can file voluntarily.

Other Litigation Challenging the CTA

The Texas case is only one of 13 lawsuits filed against the CTA in federal district courts around the country. The courts that have thus far issued rulings have split on whether the law is constitutional.

One district court in Alabama already held that the CTA is unconstitutional but declined to issue a nationwide injunction preventing FinCEN from enforcing it against all reporting entities and humans other than the plaintiffs in the case.

The case has been appealed to the Fifth Circuit Court of Appeals by FinCEN, and a decision might come down soon. Oral arguments were held in the case in September, and many observers had the impression that the court was inclined to rule in FinCEN’s favor—that is, that the CTA was constitutional.

Unlike the Texas and Alabama cases, federal district courts in Oregon, Michigan, and Virginia have all declined to issue preliminary injunctions to halt enforcement of the CTA, ruling that in their opinion the law is likely constitutional. These cases are also being appealed.

What Businesses Should Do Now

You don’t have to do anything if your business has already filed its BOI report. If you have a change that requires updating your report, you can wait to file it until the injunction is lifted or there is another resolution. If you haven’t yet filed your BOI report, you can do so even while the injunction is in effect. But you aren’t legally required to file a BOI report while the nationwide injunction is in effect.

If you would rather not file a BOI report, you can wait and see if the injunction is lifted.

Be aware, though, that if the injunction is lifted, you might not have much time to file your BOI report. That was true when the Fifth Circuit ruled on December 23 that companies had to file but gave them only a week to do so.

If a new deadline is established, your available time to prepare could be as short as 13 days. To be ready to act quickly, you should gather the information you need to file.

Also, pay attention to the latest developments so you know if and when the courts rule that you need to file. Thinking about it in this way, you might find it easier to file so you don’t have to pay attention or worry.

Overview

Beneficial Ownership Information (BOI) reporting applies to affected entities in existence on January 1, 2024, as well as those created in 2024 and later. Whether these are single-member LLCs, small multi-member LLCs, small S corporations, or small C corporations, they may be required to provide detailed reporting on their beneficial owners—the humans who own or control these entities.

The new FinCEN reporting applies to many of your clients’ businesses (and rental properties owned in LLCs). The details and nuances may shock you.

Generally reportable small corporations and LLCs are those with

• 20 or fewer full-time employees.
• $5 million or less in domestic gross receipts reported on their prior tax return.
• A physical U.S. presence.

To ensure compliance, the penalties for willfully violating the BOI reporting requirements include

• Civil penalties of up to $591 for each day a violation is not remedied.
• A criminal fine of up to $10,000.
• Possible imprisonment of up to two years.

There’s no limit to the number of people subject to these penalties. Senior managers, corporate entities, and others can be held liable for willful violations of the BOI filing rules, including

• Anyone who willfully files a false or fraudulent BOI report on a company’s behalf.
• Anyone who willfully provides false information to the filer of a BOI report.
• Beneficial owners who willfully fail to file a BOI report or file a false report, including corporate officers, directors, or employees and LLC members, employees, and trustees.

The new regulations are designed to enhance transparency, making it more difficult to conceal illicit activities through anonymous corporate structures. While your clients operate with integrity, they nevertheless will likely have to file with FinCEN.

Ignoring the new reporting requirements is not an option—staying current on these changes is key to navigating this new landscape successfully—and helping your clients do the same.