IMPORTANT UPDATES

BOI Reporting Update

On Tuesday, December 3, 2024, a federal district court in Texas issued an order granting a nationwide, preliminary injunction that: (1) enjoins enforcement of the Corporate Transparency Act (CTA) and regulations implementing its beneficial ownership information (BOI) reporting requirements, and (2) stays all deadlines to comply with the CTA’s reporting requirements, including the January 1, 2025 deadline for reporting companies to submit their initial BOI report. The Department of Justice, on behalf of the Department of the Treasury, filed an appeal of the district court’s decision on December 5, 2024.

The Financial Crimes Enforcement Network (FinCEN) has respondedthat as long as the preliminary injunction remains in effect:

• reporting companies are not required to report BOI to FinCEN; and
• reporting companies will not be subject to liability for failing to report their BOI.

FinCEN also indicated that reporting companies may continue to voluntarily submit BOI reports.

What this means:

The future of the CTA and BOI reporting, including when reports need to be submitted, remains fluid and unpredictable. While the Texas district court’s ruling may be the most recent decision issued, it is not the only case in which the CTA has been challenged. Federal district court decisions on the validity of the CTA have conflicted, and three district court cases are currently being appealed to their respective Courts of Appeals. As such, it is strongly advised that CPA firms continue to closely monitor developments and be prepared to respond swiftly if necessary.

Check the FinCEN Beneficial Ownership Information Reportingpage and the AICPA beneficial ownership information (BOI) reporting page for more.
 

BOI Background Information:

The Corporate Transparency Act (“CTA) was enacted into law as part of the National Defense Act for Fiscal Year 2021. The CTA requires the disclosure of the Beneficial Ownership Information (otherwise known as “BOI”) of certain entities from people who own or control a company.
 

Prior to the injunction, there was a January 1, 2025 deadline for reporting companies to submit their initial BOI report, but that deadline is currently on hold. Companies can voluntarily submit the information or choose to hold the reporting until the court cases are resolved.
 

What entities would be required to comply with the CTA’s BOI reporting requirement?
 

Entities organized both in the U.S. and outside the U.S. may be subject to the CTA’s reporting requirements. Domestic companies required to report include corporations, limited liability companies (LLCs) or any similar entity created by the filing of a document with a secretary of state or any similar office under the law of a state or Indian tribe.
 

Domestic entities that are not created by the filing of a document with a secretary of state or similar office are not required to report under the CTA.
 

Foreign companies required to report under the CTA include corporations, LLCs or any similar entity that is formed under the law of a foreign country and registered to do business in any state or tribal jurisdiction by filing a document with a secretary of state or any similar office.
 

Would there be exemptions from the filing requirements?
 

There are 23 categories of exemptions. Included in the exemptions list are publicly traded companies, banks and credit unions, securities brokers/dealers, public accounting firms, tax-exempt entities and certain inactive entities, among others. Please note these are not blanket exemptions and many of these entities are already heavily regulated by the government and thus already disclose their BOI to a government authority.
 

In addition, certain “large operating entities” are exempt from filing. To qualify for this exemption, the company must: 

1. Employ more than 20 people in the U.S.;
2. Have reported gross revenue (or sales) of over $5M on the prior year’s tax return; and
3. Be physically present in the U.S.

Who is a beneficial owner?
 

Any individual who, directly or indirectly, either: 

• Exercises “substantial control” over a reporting company, or
• Owns or controls at least 25 percent of the ownership interests of a reporting company

An individual has substantial control of a reporting company if they direct, determine or exercise substantial influence over important decisions of the reporting company. This includes any senior officers of the reporting company, regardless of formal title or if they have no ownership interest in the reporting company.
 

The detailed CTA regulations define the terms "substantial control" and "ownership interest" further.
 

What sort of information would be required to be reported?
 

Companies must report the following information: full name of the reporting company, any trade name or doing business as (DBA) name, business address, state or Tribal jurisdiction of formation, and an IRS taxpayer identification number (TIN).
 

Additionally, information on the beneficial owners of the entity and for newly created entities, the company applicants of the entity is required. This information includes — name, birthdate, address, and unique identifying number and issuing jurisdiction from an acceptable identification document (e.g., a driver’s license or passport) and an image of such document.