Beneficial Ownership Information Reporting Requirement Updates

On December 23, 2024, our government wasn’t just getting ready for the holiday season. The 5^th U.S. Circuit Court of Appeals lifted a nationwide preliminary injunction on the enforcement of the Corporate Transparency Act (CTA) and Beneficial Ownership Information (BOI) Reporting Rules introduced by the U.S. Department of Treasury’s Financial Crimes Enforcement Network (FinCEN).

This lifting reinstated the CTA and its reporting requirements that went into effect on January 1, 2024. Although the CTA was aimed at combating illicit financial activity, many companies cried foul – would the bad actors that were breaking the law really comply with these burdensome requirements? Well, just days later the CTA was reviewed again.

On December 26, 2024, a separate panel of the 5^th U.S. Circuit Court of Appeals reinstated the nationwide injunction. Sounds confusing? That’s because it is – the later panel made these reporting requirements “voluntary” for some small businesses pending further orders of the court.

This registration rule was previously on hold since December 3^rd when a federal court in Texas issued a preliminary injunction that prohibited the enforcement of these reporting requirements. With all of this back-and-forth, we thought we’d better look into these reporting requirements in more detail to see what could possibly be coming in the new year.

Although these requirements may again be on hold, we have been working with our own clients to see if they are required to adhere to these reporting requirements or they are exempt by checking their eligibility here. We also thought it was imperative that we review the Federal Reporting Requirement for BOI to ensure you, and your clients, are prepared for the possible January 2025 deadlines.

Why? Because this appeal is on an expedited schedule in that the deadline for most companies to file is January 13, 2025.

Failing to meet these BOI reporting requirements could result in civil penalties of up to $591 per day for non-compliance or criminal penalties of up to $10,000 or two years in prison for willful non-compliance. Those are hefty penalties, so let’s get started.

What Is BOI Exactly?

Congress enacted the Corporate Transparency Act in 2021, as part of the National Defense Authorization Act, to create a beneficial ownership reporting requirements to make it more difficult for corrupt organizations to benefit from or hide their illicit, unlawful, or otherwise ill-gotten gains through shell companies or other obscure or unclear ownership structures.

This new requirement was essentially an anti-money laundering statute that, as part of the U.S. government’s efforts to find and punish these “bad actors,” requires many U.S. companies to report information about their beneficial owners. That is, the individuals who ultimately own or control the company. That way, the government can prevent and combat money laundering, corruption, tax fraud, and terrorist financing.

This information must be reported to the Financial Crimes Enforcement Network – FinCEN – a bureau of the U.S. Department of the Treasury.

Will I Need to Adhere to BOI Reporting Requirements?

The U.S. government will consider you a “reporting company” if you are one of the following:

A corporation, limited liability company (LLC), or was created in the United States by filing a document with a secretary of state or any similar office under the law of a state or Indian tribe; or
A foreign company that was registered to do business in any U.S. state or Indian tribe by such a filing.

If you are one of the above reporting companies, you will need to report beneficial ownership information through the FinCEN website. You will receive confirmation of receipt once you complete the report, and it is filed with FinCEN. That way, you can keep this receipt as proof that you adhered to the CTA BOI reporting requirements.

NOTE: You may be one of the 23 types of entities that are exempt from these BOI reporting requirements! Publicly traded companies, nonprofits, and certain large operating companies are exempt, and you can check your eligibility here before you go through the reporting process.

FinCEN also offers a Small Entity Compliance Guide, which includes a chart listing each of the 23 exemptions and a checklist that may help you determine whether your company qualifies for an exemption.

Important Deadlines to Consider

If you are not one of the 23 exempt types of entities, you may need to comply with these requirements by January 2025:

If you are a reporting company that was created or registered in the United States before January 1, 2024, you must file your initial BOI reports with FinCEN by January 13, 2025.
If you are a reporting company that was created or registered in the United States on or after September 4, 2024, and had a filing deadline between December 3-23, 2024, you also must file your initial BOI reports with FinCEN by January 13, 2025.
If you are a reporting company that was created or registered in the United States on or after December 3, 2024, and on or before December 23, 2024, you have an additional 21 days from the original filing deadline to file your initial BOI reports with FinCEN.
If you are a reporting company that qualifies for disaster relief, you may have extended deadlines that fall beyond January 13, 2025 to file your initial BOI reports with FinCEN. These companies should follow whichever deadline falls later. Those additional deadlines can be found here.
Reporting companies that are created or registered in the United States on or after January 1, 2025 have 30 days to file their initial BOI reports with FinCEN after receiving actual or public notice that their creation or registration is effective.

You will need to submit your company’s full legal name, business address, the state where your company was formed, and your taxpayer identification number and an identity document (such as a filed Articles of Incorporation). You will also need to submit the beneficial owners’ full legal names and birth dates, home addresses, and a copies of their driver’s license or passport.

We will continue to monitor these developments because there are many groups who are not happy with these burdensome BOI reporting requirements and are continuing to fight the possibility of them coming to fruition. For most businesses, the deadline to file will be January 13, 2025 if the CTA and its reporting requirements are again reinstated.

Update (March 2025):

Recent developments regarding the Corporate Transparency Act and the beneficial ownership information (BOI) reporting requirements. The Treasury Department has announced significant changes that impact the enforcement of these regulations.

According to the latest updates from the Treasury Department:

The Treasury will not enforce any penalties or fines associated with the BOI reporting rule under the existing regulatory deadlines.
Additionally, no penalties or fines will be enforced against U.S. citizens, domestic reporting companies, or their beneficial owners after the forthcoming rule changes take effect.
The scope of the BOI reporting rule will be narrowed to foreign reporting companies only.

About Critical Connexion:

Critical Connexion is a distinguished business management & consulting firm that focuses on leveraging a foundation of leading finance, HR management, strategic sourcing, risk & operations experts to accelerate brand success for clients.

We specialize in navigating the evolving landscape of corporate growth by adeptly addressing changing systems, processes, and people requirements. Recognizing the substantial nature of technology and changing business needs, we ensure that these resources are directed with foresight and expertise. We are your extended partners for business growth, scaling seamlessly and brand elevation.

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