FinCEN’s BOI Reporting Requirement Blocked Once Again
This continues to be a developing story. There may be additional challenges and court rulings that continue to impact Beneficial Ownership Information (BOI) filing requirements. KSM will provide updates as additional information becomes available. For the most recent updates, visit KSM’s FinCEN insights page.
The Corporate Transparency Act introduced a new reporting requirement for 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 Jan. 23, 2025, the U.S. Supreme Court granted the government’s motion to stay a nationwide injunction issued by a federal judge in Texas (Texas Top Cop Shop, Inc. v. McHenry). However, a separate nationwide order was issued by a different federal judge in Texas related to a different case (Smith v. U.S. Department of Treasury), which still remains in place – and the government has yet to appeal. As a result of the second nationwide order, reporting companies are not currently required to file BOI with FinCEN despite the Supreme Court’s ruling.
FinCEN’s commentary related to the ongoing legislation indicates that 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.
Timeline of BOI Reporting Requirement
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. The Department of Justice quickly filed a Notice of Appeal and subsequently requested a stay as to the preliminary injunction. Meanwhile, FinCEN acknowledged their intent to comply with the preliminary injunction pending the outcome of these court proceedings.
On Dec. 23, 2024, the U.S. Court of Appeals for the Fifth Circuit granted a stay of the district court’s preliminary injunction. Thus, the requirement for reporting companies to file BOI reports was back in effect, with a short deadline extension granted to Jan. 13, 2025, for most filings. The Dec. 26, 2024, ruling has reversed this ruling by vacating the stay order.
On Dec. 26, 2024, in a surprise ruling, a panel of the U.S. Court of Appeals for the Fifth Circuit reinstated a nationwide injunction that suspends enforcement of BOI reporting obligations. This latest twist vacated the same court’s order from three days earlier granting a stay of the injunction.
Continued Vigilance in a Rapidly Evolving Environment
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 future rulings favor the government, or the injunction order is otherwise lifted. As we have seen, this continues to be a moving target, and future rulings may require immediate action on short notice. Additional rulings will be issued, and although the timing is unknown, these rulings could be issued within days.
It is important to monitor 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
Legal Counsel Recommended
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:
If you have questions or would like further information, please contact a KSM advisor via the form below.
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