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Court battles rage: File your FinCen BOI report now or wait.

The Corporate Transparency Act (CTA) was effective on January 1, 2024, but it has yet to take off.

Background on the CTA

As per CTA criteria, most smaller corporations, limited liability companies (LLCs) and other business entities are required to file a beneficial ownership information (BOI) report with the U.S. Department of Treasury Financial Crimes Enforcement Network (FinCEN). The BOI report identifies and provides contact information for the individual who owns or controls the entity. This is not made public and is used only by law enforcement agencies to control money laundering, drug trafficking and other illegal activities.

The original deadline for filing BOI reports for businesses in existence before 2024 was January 1, 2025. The business started in 2024 and had 90 days for formation to file. Filing can be done online at FinCEN’s BOI reporting website for free.

Penalties are big

Willful violations of the CTA are published by a civil fine of $591/day, upto $10,000 in criminal penalties and two years in prison.

How is it going?

The new filing requirement is not going well. As of early December 2024, only around 9 million of the estimated 32.6 million businesses subject to the CTA had filed their BOI reports.

BOI report requirement, decisions by the court

The Texas Federal District Court ruled on December 3, 2024, that if you do not file your FinCEN BOI report during the court’s injunction, you could not be penalized by FinCEN. On December 23, 2024, the Fifth Circuit Court of Appeals ruled to overturn the Texas injunction and immediately reinstate the FinCEN BOI filing requirements.
FinCEN later 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.

Effect on filing reports

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

The reporting companies are not currently required to file the beneficial ownership information with FinCEN, and they 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 with a 30-day reporting deadline.
While the injunction is in effect, the BOI filing is not required, according to the FinCEN’s alert, but you can file voluntarily.

Other litigation challenging the CTA

The Texas case is only one of the 13 nationwide lawsuits filed against the CTA in federal district courts. The courts that issued the rulings are split on where the law is constitutional.
One district court in Alabama already held that the CTA is unconstitutional. Still, it declined to issue a nationwide injunction preventing FinCEN from enforcing it against all reporting entities and individuals other than the plaintiffs in the case.
FinCEN has appealed to the Fifth Circuit of Appeals, and a decision is expected soon. In September, oral arguments were held, and observers thought the court was inclined to rule in FinCEN’s favor.
Unlike Texas and Alabama cases, federal district courts in Oregon, Michigan and Virginia have declined to issue preliminary injunctions to halt enforcement of the CTA, ruling that, in their opinion, the law is likely constitutional. The cases have gone for appeal.

Other threats to the CTA

Even before the Texas district court issued its order enjoining the CTA, there were calls to extend the deadline by a year since most of the 32.6 million reporting companies had not filed BOI reports. The delay is expected to increase further due to the Texas district court’s injunction.
Bills have been introduced in Congress to repeal the CTA. It is unclear whether the Trump administration will support or repeal it.
The new administration could
  • Direct FinCEN to delay the existing January 1, 2025, filing deadline or make other changes in its regulations.
  • Direct the Department of Justice not to defend the CTA in court,
  • Cut the funding for FinCEN to enforce the CTA, or
  • Work with Congress to eliminate the CTA or limit its scope.

What should businesses do now?

If you have already filed the BOI report, there is nothing much to do.
If your report needs updating due to a change, wait until the injunction is lifted or another resolution is reached.
You can still file despite the injunction in force if you haven’t filed your BOI report. But there is no need to do so.
If you have not filed the BOI report, you can wait for the injunction to be lifted.
But note that once the injunction is lifted, you will not have much time to report. When the Fifth Circuit ruled on December 23, the companies had only a week’s time to report.
If a new deadline is set, the available time could be as short as 13 days. So start collecting information for your BOI report filing.
Look out for the court developments on the filing deadline. It is best to file now to make things simple and avoid tension.
BergerCPAFirst, with over 30+ years of experience, offers comprehensive tax preparation services for individuals and businesses nationwide. Our commitment is to provide personalized attention while ensuring compliance and maximizing tax benefits. If you have any questions or would like to schedule a consultation, please call (201) 587-9200 or send us an inquiry.

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