Reinstatement of Beneficial Ownership Reporting Requirements Brings Clarity and Adjusted Deadlines for Companies
The Financial Crimes Enforcement Network (FinCEN) has reinstated the requirement for reporting companies to submit beneficial ownership information (BOI), following a period of legal uncertainty. A recent decision by the federal Court of Appeals overturned a prior injunction, paving the way for the resumption of BOI reporting under the Corporate Transparency Act (CTA). In recognition of the challenges posed by the shifting legal landscape, the Department of the Treasury has announced revised deadlines to provide companies ample time to comply.
The reinstated reporting requirements aim to enhance transparency in financial transactions and combat illicit activities such as money laundering, terrorist financing, and tax evasion. By identifying the individuals who ultimately own or control companies, law enforcement agencies gain valuable insights into complex financial networks and can more effectively investigate and prosecute financial crimes. The CTA represents a significant step towards strengthening the integrity of the U.S. financial system.
The Treasury Department has implemented a tiered approach to the new deadlines, taking into consideration the various circumstances affecting reporting companies. Companies created or registered before January 1, 2024, now have until January 13, 2025, to file their initial BOI reports. This provides a short extension from the original January 1, 2025 deadline. Similarly, entities formed on or after September 4, 2024, whose original filing deadlines fell between December 3, 2024, and December 23, 2024, also have until January 13, 2025, to submit their reports.
For companies established between December 3, 2024, and December 23, 2024, a 21-day extension has been granted from their initial reporting deadlines. This accommodates the period of uncertainty caused by the preliminary injunction. Recognizing the impact of natural disasters, companies eligible for disaster relief will have their deadlines extended to the later of January 13, 2025, or the specific disaster relief deadline. This ensures that businesses facing extraordinary circumstances are not unduly burdened by reporting requirements. Going forward, new companies created or registered after January 1, 2025, will have 30 days from the date of their official creation or registration, either through actual or public notice, to file their BOI reports.
The legal challenges to the CTA continue, with certain exemptions remaining in effect. Plaintiffs in the ongoing National Small Business United v. Yellen case, including Isaac Winkles and associated reporting companies, are currently exempt from submitting BOI information. While the U.S. District Court for the Eastern District of Texas had issued a nationwide preliminary injunction against the CTA in Texas Top Cop Shop, Inc. v. Garland, the U.S. Court of Appeals for the Fifth Circuit subsequently granted a stay pending appeal by the Treasury Department. This legal back-and-forth highlights the ongoing debate surrounding the CTA’s implementation.
The Department of Justice remains steadfast in its defense of the CTA, asserting its constitutionality. This position has been bolstered by rulings in favor of the Treasury Department in other district courts, including the Eastern District of Virginia and the District of Oregon. These legal victories underscore the government’s commitment to upholding the CTA and its crucial role in enhancing financial transparency. The revised deadlines offer much-needed flexibility for reporting companies, balancing the need for compliance with the realities of navigating a complex legal and regulatory environment.
The Treasury and FinCEN have also recognized the impact of natural disasters on reporting companies and have provided specific relief for those affected. To qualify, companies must have a BOI reporting deadline that falls within a specific disaster period, as designated by the Federal Emergency Management Agency (FEMA). This period begins one day before the disaster’s start date and ends 90 days after. In cases where multiple disasters related to the same storm have different start dates, FinCEN uses the earliest start date. The affected company must also be located in an area designated by both FEMA and the Internal Revenue Service as qualifying for assistance and tax relief, respectively. This relief mechanism acknowledges the practical challenges faced by businesses during times of crisis. FinCEN has issued specific notices providing relief for victims of Hurricanes Beryl, Debby, Francine, Helene, and Milton. This demonstrates a commitment to supporting businesses facing exceptional circumstances while upholding the overarching goals of the CTA.
