BOIR Filing Requirements Currently Paused

Beneficial Ownership Information Report (BOIR) Updates: Past and Present

The Beneficial Ownership Information Report (BOIR), introduced under the Corporate Transparency Act (CTA) as part of the Anti-Money Laundering Act of 2020, aims to increase business transparency to combat financial crimes such as money laundering, terrorist financing, and tax evasion. The BOIR requires businesses to disclose individuals who own or control the entity, making it a significant reporting requirement for many companies.

Key Takeaways

Background of the BOIR and Key Requirements

The BOIR mandates disclosure from individuals meeting one of the following criteria:

• • Ownership Interest: Directly or indirectly owning at least 25% of the entity’s equity.
  • Substantial Control: Exercising significant decision-making authority or control over the entity.

Entities required to file include corporations, LLCs, and other similar entities created or registered in the U.S., with exceptions for large operating companies, regulated entities, inactive entities, and others as outlined by the CTA. Filing involves reporting details such as the full legal name, date of birth, address, and government-issued ID information for each beneficial owner.

Timeline of Events

Initial Implementation and Concerns

The BOIR’s original deadlines required businesses formed before January 1, 2024, to file by January 1, 2025, while businesses formed in 2024 or later were to file within 30 days of formation. However, significant concerns arose regarding the complexity and burden of the reporting requirements, with critics citing constitutional issues and the strain on small businesses. Critics argue that the BOIR’s requirements violate privacy protections and impose undue burdens, particularly on small businesses, leading to First and Fourth Amendment challenges.

The December 2024 Injunction

On December 3, 2024, the Eastern District of Texas issued a preliminary injunction halting the BOIR’s enforcement for all companies, following a prior March 2024 decision in Alabama preventing the BOIR rules from being enforced in a specific case.

The Eastern District of Texas court decision was broader and ruled that the reporting requirements infringed on First and Fourth Amendment rights, imposing unreasonable burdens on businesses. Support from organizations such as the American Institute of CPAs (AICPA) further emphasized the need for delay and refinement of the regulations. The Department of Justice promptly appealed the decision on behalf of the Department of Treasury, leaving businesses in limbo as FinCEN paused enforcement.

Reversal of the Injunction

The injunction was lifted on December 23, 2024, reinstating the BOIR requirements with updated deadlines. This reversal changed certain deadlines, with businesses formed before January 1, 2024, now required to file by January 13, 2025. Companies formed between September 4, 2024, and December 23, 2024, also had until this date to comply. Entities formed after December 23, 2024, were still required to file within 30 days of formation or registration.

Reversal Vacated and Injunction Reinstated

Shortly after the December 23 stay temporarily reinstated enforcement, the Fifth Circuit vacated it on December 26, returning to the previous status where BOI reporting is paused.

The injunction reinstated on December 26 means BOI reporting is currently paused, and companies are not required to file unless voluntary.

Current Status of BOIR Filing Requirements (As of December 30, 2024)

Due to ongoing litigation, reporting companies are not currently required to file Beneficial Ownership Information (BOI) reports with FinCEN. A federal court issued a preliminary injunction halting enforcement of the Corporate Transparency Act’s (CTA) BOI reporting requirements. While the injunction is in effect, businesses are not subject to penalties for non-compliance but may voluntarily submit their BOI reports.

Potential Changes Ahead

This injunction is temporary and could be lifted at any time, depending on the outcome of the Department of Justice’s appeal. If the injunction is ultimately overturned, businesses must quickly comply with the BOI reporting requirements, which may result in penalties for late or inaccurate submissions. FinCEN may grant additional time if enforcement resumes.

Implications for Businesses

• • If Filing Becomes Mandatory: Businesses should ensure they are ready to meet BOI reporting requirements, including gathering and maintaining accurate ownership and control information. Non-compliance could result in significant penalties, including daily fines and potential criminal charges.
  • If Filing Remains Voluntary: Businesses may choose to voluntarily submit their BOI reports to demonstrate transparency and avoid last-minute compliance rushes if requirements are reinstated.

Filing Process

Companies can file their BOIR through FinCEN’s online portal or by submitting a downloadable form. The process involves reporting per company, with all beneficial owners’ information consolidated into a single submission.

Penalties for Non-Compliance

Non-compliance can lead to:

• • Civil Penalties: Up to $591 per day for failure to file accurately and on time.
  • Criminal Penalties: Fines of up to $25,597 and imprisonment for up to 2 years for willful misrepresentation.

Given the uncertainty, businesses should stay informed about legal developments and consider consulting legal and compliance professionals to prepare for potential changes. Regularly checking updates on the FinCEN website is highly recommended.

Out of an abundance of caution, should you need any assistance completing and filing your Beneficial Ownership Information Report, contact Volpe Consulting and Accounting Services.