FinCEN strikes again: Recent Corporate Transparency Act updates
On Jan. 1, 2024, the Corporate Transparency Act (CTA) took effect.
Originally enacted to combat financial crimes such as money laundering, terrorist financing, and tax evasion, the CTA requires companies (corporations, LLCs, and other entities created by filing formation documents with a state agency) to file a beneficial ownership information report (BOIR) with the Financial Crimes Enforcement Network (FinCEN), a bureau within the Treasury Department.
Each BOIR discloses personal information about individuals who, whether directly or indirectly, own or control a company, such as full names, addresses, driver’s license numbers, and birth dates. Plus, the reporting requirement is ongoing, requiring any changes in ownership or management be reported within 30 days of the change. The original filing deadline was Jan. 1, 2025, and if a business failed to comply, it would face fines or other penalties.
If you’re a business owner, you’re likely already familiar with these acronyms — FinCEN, BOIR, CTA — and all their will-they won’t-they government back and forth. For those unfamiliar, a short history is as follows.
On Dec. 3, 2024, in the Texas Top Cop Shop, Inc. v. Garland case, the U.S. District Court for the Eastern District of Texas imposed a nationwide injunction on the CTA’s BOIR requirements, meaning the Jan. 1, 2025, reporting deadline was suspended.
The court agreed with the small business owners that the CTA overregulated companies who conducted business only within the state and didn’t engage in any interstate commerce. In response, FinCEN made BOIRs voluntary rather than mandatory, essentially encouraging businesses to keep filing reports (likely in the hopes that the injunction would be lifted since it filed an appeal to the injunction two days later, on Dec. 5).
On Dec. 23, the U.S. Court of Appeals for the Fifth Circuit stayed the injunction and reinstated the BOIR requirement with a new Jan. 13, 2025, deadline — but not for long; on Dec. 26, the injunction was reinstated when the Merits Panel of the Fifth District vacated the Dec. 23 stay. Thereafter, the Department of Justice filed another appeal with the U.S. Supreme Court.
Prior to hearing on that appeal, the Eastern District of Texas Court issued another nationwide injunction in a new case, Smith v. Dept. of the Treasury. So even though the U.S. Supreme Court on Jan. 23, granted the appeal and lifted the injunction imposed in the Top Cop Shop case, the Smith injunction remained and BOIR requirements were still stalled. On appeal from the Department of Justice, on Feb. 18, the Smith court lifted its injunction.
Thus, the most-recent shoe of the dance has dropped and with contests against it being struck down by the Supreme Court touting combating financial crimes and terrorist financing as a main purpose, the reporting requirements likely will stick.
Though FinCEN did recently announce an incentive to revise BOIR rules to be less burdensome on low-risk, small businesses, which certainly seems consistent with the new Protect Small Businesses from Excessive Paperwork Act, passed by the House on Feb. 10.
But what are low-risk businesses? What qualifies as a small business? And did we really need a whole act for less paperwork? Aside from the obviously ironic amount of paperwork on that alone, in the voice of Chandler Bing, could our representatives be any less creative?
But the point is, BOI reporting requirements are mandatory again, with the following new deadlines: for most businesses, the new deadline is March 21, 2025; for businesses formed after Feb. 18, 2025, BOIRs must be filed within 30 days from the date of formation; and for any businesses that received a later filing date due to disaster relief, the later deadline remains.
Businesses can file a BOIR directly through FinCEN’s online portal but the 30-day filing period does not allow much room for error. If you’re concerned about whether your business needs to file a BOIR, would like more information, or assistance filing, DKMO can help. Contact us at CTA@dkmolaw.com.
• Meghan R. Hartnett is a corporate associate attorney for Drost Kivlahan McMahon & O’Connor, LLC in Arlington Heights.