FinCEN To Comply (for Now) With Court’s Ruling That Blocks Enforcement of BOI Reporting Requirement

The Corporate Transparency Act introduced a new reporting requirement for Beneficial Ownership Information (BOI), which went into effect Jan. 1, 2024. Enforced by the Financial Crimes Enforcement Network (FinCEN), the requirement states that Reporting Companies must disclose detailed information about their Beneficial Owners and Company Applicants.

On Dec. 3, 2024, the U.S. District Court for the Eastern District of Texas blocked enforcement of BOI reporting by issuing a nationwide injunction on compliance with BOI obligations.

On Dec. 5, 2024, the Department of Justice, on behalf of the Department of the Treasury and FinCEN, filed a Notice of Appeal on Dec. 5, 2024, regarding the Texas Court’s preliminary injunction that suspended enforcement of BOI reporting obligations. Until the outcome is known, FinCEN intends to comply with the Court’s ruling. Per FinCEN:

• In light of a recent federal court order, reporting companies are not currently required to file beneficial ownership information with FinCEN and are not subject to liability if they fail to do so while the order remains in force. However, reporting companies may continue to voluntarily submit beneficial ownership information reports.

FinCEN’s full commentary can be found as an alert on its BOI resource page.

Continued Vigilance

Reporting companies that choose not to file BOI reports while the injunction remains in effect should continue to gather the information required to file their BOI reports. Reporting companies must be prepared to quickly file if the appeals ruling favors the government or the injunction order is otherwise lifted, including possible scenarios that restore the Jan. 1, 2025, deadline for reporting companies that existed prior to 2024.

It is important to monitor potential BOI filing requirements and related deadlines. Penalties for willfully violating the BOI reporting requirements include:

• Civil penalties of up to $591 per day that a violation is not remedied (amount adjusted for inflation)
• Criminal penalties of up to a $10,000 fine and/or imprisonment of up to two years

Because many aspects of this new reporting requirement are legal in nature and outside the scope of traditional tax and accounting services, consultation with legal counsel is recommended regarding current compliance requirements and guidance relating to court procedures.

BOI Resources

For more information on the new reporting requirement, FinCEN offers detailed and helpful guidance on BOI reporting, including:

• BOI reporting resource page: https://www.fincen.gov/boi
• BOI FAQ: https://www.fincen.gov/boi-faqs
• BOI Small Entity Compliance Guide: https://www.fincen.gov/boi/small-entity-compliance-guide

This continues to be a developing story. KSM will provide updates as information becomes available.