Over the past several weeks we have closely monitored the various legal challenges to the filing requirements of the Corporate Transparency Act (CTA).
Recently a Texas federal district court judge in Texas Top Cop Shop, Inc., et al. v. Garland, et al., No. 4:24-cv-00478 (E.D. Tex., Dec. 3, 2024) issued a nationwide preliminary injunction temporarily halting the enforcement of the CTA and the U.S. Department of the Treasury’s Financial Crimes Enforcement Network’s (FinCEN) regulations on Beneficial Ownership Information Reporting Requirements (BOI Reporting Requirements). Earlier today, the same court denied a motion from the defendants (the government) to stay the injunction.
In addition to the Texas case, several cases are working their way through multiple Federal circuits, including a case pending the Fifth Circuit for which the government is seeking an accelerated review schedule.
Yesterday, we learned that the Continuing Resolution under consideration in Congress, which ultimately did not pass, contained a provision to extend the filing date until January 2026.
Small business owners are justifiably confused as events are moving fast and the January 1, 2025 reporting deadline continues to draw closer.
What should small business owners do?
First, some background on the CTA.
The twenty-two page CTA was part of the over 1,400 page National Defense Authorization Act that was enacted by Congress on January 1, 2021.
Congress stated that the objectives of the CTA were to combat money laundering, terrorist financing, corruption, and tax fraud. One way the CTA seeks to accomplish these goals is by requiring private companies to report their ownership information to the federal government.
The CTA requires “reporting entities” to report beneficial ownership information through FinCEN for almost all corporations, limited liability companies, and other similar entities formed or registered to do business in the United States.
There are twenty-three types of entities that are exempt from filing the Beneficial Ownership Information Report (BOIR) primarily publicly traded companies, banks, credit unions, many tax exempt (nonprofit) organizations, and many similar types of entities. For additional information on whether your entity qualifies for an exemption or for more questions about the filing deadlines, please visit the FinCEN website.
What is not exempt? Small privately held businesses.
Unless your business is exempt, and it is likely not, you are required to file a BOIR with FinCEN.
Prior to the Texas court injunction, the filing deadline (i) for companies formed after January 1, 2024 was ninety days after the formation date of the company and (ii) for companies formed prior to January 1, 2024, the filing deadline was January 1, 2025.
Failure to file the BOIR for your company could result in significant penalties; however, the penalties are currently on hold because of the injunction.
As a small business owner, you have a choice to make.
First, you could proceed with filing the BOIR for your company before the January 1, 2025 deadline, because even with the injunction FinCEN is currently accepting “voluntary” filings.
Second, you could prepare all the necessary information for the beneficial ownership report and be ready to file the report in the event the Texas case, or any of the several others currently pending, are finally adjudicated with the CTA found by the courts to be constitutional.
Whether you decide to file now or later, here is the information you will need to complete your company’s initial beneficial ownership report:
- The full legal name of your company
- Tax Identification Number Type (e.g. EIN, SSN, Foreign)
- Tax Identification Number
- Country/Jurisdiction of formation
- Current US Address
- Company Applicant FinCEN IDs
- Beneficial Owner Information
Please note that a Company Applicant only needs to be reported for companies formed after January 1, 2024. If our law firm formed your company, we are the Company Applicant for your company. For companies that were formed by our firm, you will need to reach out to Leah Hall leah@mitchell-firm.com, to obtain the necessary FinCEN IDs for the attorney responsible for the filing of your formation documents.
If you decide to file your BOIR before the final decision is made on the Texas case – or any of the other cases- you can either file, the BOIR yourself or you can engage a third-party service to file the BOIR for you.
We recognize some of our clients will file only one beneficial ownership information report (because they only need to report for one company) while others will file for multiple entities. While our firm does not offer these filing services, we have investigated some options for you.
First, you can file the information yourself. Here is a quick “how to” video.
Second, for those of you filing for only one or two companies, we suggest you review the offerings of Northwest Registered Agent.
Finally, if you are filing more reports for multiple companies, we suggest you consider either of the following:
We recognize that this situation is in great flux, and we are happy to speak with you on this matter. Please contact us if you have any questions.