The Corporate Transparency Act, signed into law on January 1, 2021, established a requirement that many businesses file a Beneficial Ownership Interest Report with the Financial Crimes Enforcement Network (“FinCen”), a bureau within the US Department of the Treasury.
FinCEN’s mission is to safeguard the US financial system from illicit activity, money laundering & financing of terrorism as well as promote national security through strategic use of financial authorities and the collection, analysis and dissemination of financial intelligence. FinCen’s receipt of Beneficial Ownership Interest Reports will give FinCEN access to ownership information for many businesses registered and operating across the country, presumably aiding the Network in its mission.
There are 23 different exemptions that permit a business to avoid filing a Beneficial Ownership Interest Report. The practical result of these exemptions is to permit larger companies, publicly traded companies, and non-profit organizations from having to file. Small businesses are also exempt from filing if they meet three criteria, specifically (i) having more than 20 employees; (ii) operating a physical office in the United States; and (iii) filing federal tax returns demonstrating more than $5 million in annual gross receipts or sales.
Lawsuits ensued following passage of the law in 2021 resulting in an injunction suspending implementation of the reporting requirement. A Fifth Circuit ruling on December 26, 2024 lifted the injunction. By December 28, 2024, however, the injunction was back in place. Legal arguments before the Fifth Circuit over whether to keep the injunction in place while the broader lawsuit is heard by the full court are scheduled for March 25, 2025.
When the injunction was briefly lifted in December, January 13th became the deadline for a large majority of companies to submit their BOI reports. The deadline is once again suspended and the US business community awaits further information from the courts and FinCEN.
In the meantime, millions of US businesses have already completed their BOI reporting requirement. Business owners should discuss their strategy for BOI compliance with their legal counsel.