Court of Appeals Reinstates Preliminary Injunction on BOI Reporting Requirements

Latest Updates on BOI Reporting

In yet another twist from the ongoing litigation of the Corporate Transparency Act (CTA), as of Dec., 26, 2024, businesses that meet the definition of a "reporting company" do not have Beneficial Ownership Information (BOI) reporting requirements under the CTA. 

The U.S. Court of Appeals for the Fifth Circuit's merits panel is currently expediting an appeal of a decision just days earlier by the motions panel of the court that temporarily granted BOI reporting requirements be allowed, pending appeal. 

Based on the Dec. 26 decision, all deadlines — the original ones and the extended ones the U.S. Treasury put in place after the government's appeal was granted — are no longer in effect because BOI reporting requirements are temporarily halted. 

Businesses that wish are able to voluntarily file a BOI report.

The following is a summary of decisions over the past three weeks during this ongoing litigation. 

Dec. 23: The Fifth Circuit grants an Emergency Motion for Stay pending appeal that reinstates BOI reporting requirements. With about 32 million businesses expected to be impacted, the Treasury Department announces an extension of deadlines for reporting to the Financial Crimes Enforcement Network (FinCEN). Again, these deadlines currently are not in effect.

• Reporting companies created or registered prior to Jan. 1, 2024, have until Jan. 13, 2025.
• Reporting companies created or registered in the U.S. on or after Sept. 4, 2024, that had the deadline between Dec. 3 and Dec. 23, 2024, have until Jan. 13, 2025.
• Reporting companies created or registered in the U.S. on or after Dec. 3, 2024 and on or before Dec. 23, 2024, have an additional 21 days from their original filing deadline to file.
• Reporting companies created or registered in the U.S. on or after Jan. 1, 2025, have 30 days to file after receiving actual or public notice that their creation or registration is effective.

At the present time, none of this action from the Fifth Circuit impacts the members of the National Small Business Association (if a member as of March 1, 2024) nor the original plaintiffs in National Small Business United v. Yellen, who do not have to report their BOI at this time.

Dec. 17: The Fifth Circuit denies a motion brought by the U.S. Department of Justice to stay the preliminary injunction.

Dec. 3: A federal district court in Texas issues an injunction that temporarily blocks enforcement of the CTA and its reporting rule. 

The final outcome of this case remains uncertain, so individuals that could be subject to BOI reporting based on future court decisions should stay up to date on legal proceedings that could impact compliance requirements, especially if some of the previously proposed deadlines are reinstated.

Original article

Many businesses identified as reporting companies — primarily LLCs, S corporations, and C corporations — will have additional reporting requirements under the Corporate Transparency Act (CTA). This mandate from the U.S. Department of Treasury’s Financial Crimes Enforcement Network (FinCEN) is intended to help prevent and combat money laundering activities by requiring some businesses to report their Beneficial Ownership Information (BOI).

Who Qualifies as a Beneficial Owner?

There are a few factors used in determining a beneficial owner, including an individual who, indirectly or directly:

• Exercises substantial control over a reporting company
• Owns or controls 25% or more of a reporting company’s ownership interests

There are two types of reporting companies; a Domestic reporting company (DRC) and a Foreign reporting company (FRC). Both involve corporations and limited liability companies. Both must file a document with a secretary of state or similar office. The difference is a DRC is created through the filing of its documents, while an FRC is formed under the law of a foreign company and has to file documents to register to conduct business in the U.S.

There are, however, exemptions for certain entities. For example, large operating companies, public utilities, certain financial institutions, and insurance companies might be exempt if all criteria are met. In all, there are 23 exemptions, so your business should seek legal counsel to understand if you qualify as exempt.

Note: Although not specified in FinCEN’s rule, sole proprietorships and general partnerships might also be exempt.

How Does My Business File a BOI Report?

The electronic filing system is available and the form to report BOI can be accessed online.

What Information Is Required on a BOI Report?

A reporting company must report:

• Legal name
• Any trade names, DBAs, or trading as names
• Current street address of its principal place of business
• Its jurisdiction of formation or registration
• Taxpayer ID#

Beneficial owners must report:

• Individual’s name
• Date of birth
• Residential address
• An ID# from an acceptable ID document (passport, U.S. driver’s license, and name of issuing state or jurisdiction of the ID document
• Must supply an image of the ID document and it cannot be expired

For additional information, check out the BOI webpage.

What Are the Penalties for Non-Compliance?

The penalties are steep. Willful violations could result in civil penalties and/or criminal penalties. FinCEN published inflation adjustments in January 2024 for civil monetary penalties, increasing the potential fine to $591 per day (effective Jan. 25, 2024) from its original $500. The cap remains at $10,000. Criminal penalties could include imprisonment of up to two years.

Paychex BOI Reporting Services can help your business file your BOI report, making it as smooth and stress-free as possible so you can focus on what truly matters – running your business.