BOI Reporting Obligations Reinstated

The Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) is the agency that enforces the Corporate Transparency Act (CTA). Recently, FinCEN sent out a notice indicating a new deadline of March 21 for small businesses to comply with its beneficial ownership information (BOI) reporting requirement.

That said, if your reporting deadline is in April because you qualify for disaster relief, follow the April deadline. Otherwise, a nationwide injunction was issued, temporarily stopping the effective date of the reporting rules while a lawsuit was pending.

But the government appealed, so currently, there are no legal roadblocks to the reporting requirements. Companies are once again required to file identifying details of individuals who own or control entities such as corporations, LLCs, or other entities that were created by filing a document with a secretary of state or similar office.

What do the opponents of the CTA say?

Arguments against the CTA suggest that the reporting requirements are overly broad and burdensome for some small businesses. The CTA legislation was originally designed to combat illicit financial activities.

Still, a Treasury official noted that “in keeping with the Treasury’s commitment to reducing regulatory burden on businesses,” the agency would “assess its options to modify further deadlines or reporting requirements for lower-risk entities, including many U.S. small businesses, while prioritizing reporting for those entities that pose the most significant security risks.”

How has FinCEN responded?

FinCEN gave a nod to its intention to do just that, writing on its website, “FinCEN will assess its options for further modifying deadlines.” At the same time, there are other CTA case appeals on other court dockets, but the courts have declined to issue a preliminary injunction on behalf of plaintiffs challenging the constitutionality of the CTA.

The House unanimously passed H.R. 736, the Protect Small Business from Excessive Paperwork Act, which would postpone the BOI reporting deadline for one year for most companies—those reporting companies formed or registered before January 1, 2024. The bill pushes the new reporting deadline to January 1, 2026, but it’s not certain when or if the Senate may move the bill—currently in the Banking, Housing and Urban Affairs committee—to the floor for a vote.

What is the goal of H.R. 736?

H.R. 736 is intended to alleviate the chaos that has marked the implementation of the CTA, which was passed as part of the National Defense Authorization Act for Fiscal Year 2021. The illegal activities that the CTA targets include tax fraud, money laundering, and financing for terrorism.

By requiring businesses to disclose their ownership, criminals and other bad actors won’t be able to hide behind shell companies and complicated business structures as easily.

Another bill—known as the Repealing Big Brother Overreach Act—would toss the reporting requirements for good and attempt to eliminate the Corporate Transparency Act. However, this bill doesn’t have bipartisan support and it is sitting in committee.

FinCEN’s approach moving forward

The federal government has set new deadlines and indicated it may yet change the rules. FinCEN noted that it will provide an update before March 21 with further changes to the deadline, acknowledging that some companies may need additional time to comply.

FinCEN also noted that it plans to start revising the Corporate Transparency Act’s reporting rule. Revisions may reduce the burden for lower-risk entities. For the first time, the government, in its most recent court filings and FinCEN announcements, has signaled an intention to consider possible modifications to the CTA for lower-risk entities.

FinCEN announced it “will assess its options to modify further deadlines or reporting requirements for lower-risk entities, including many U.S. small businesses, while prioritizing reporting for” others that pose significant national security risks.

There is no fee if you file directly with FinCEN, so be vigilant for websites and services that charge for filing the paperwork. Also, pay attention to any legislative changes that may impact reporting requirements, but prepare to file. Noncompliance could result in substantial fines and penalties.

The current deadline remains firm—entities should proceed with filing without delay. Given the complexity of these requirements and the potential for future legal and legislative developments, seeking professional legal and compliance advice is recommended.