The Corporate Transparency Act Has Been Halted: Decision Time is Now for BOIR Filing
Just weeks before the Corporate Transparency Act (CTA) and its associated reporting requirements were set to be due at year end, a US District Court in Texas has issued an injunction against the CTA. The immediate effect is to invalidate – perhaps only temporarily – the additional reporting requirements that most business entities had to satisfy by year end.
If you own a business, the CTA injunction may have immediate ramifications on your company’s reporting approach.
Evident Pros can help business owners file their beneficial owner information reports (BOIRs) if they still choose to do so. We also understand that many business owners will choose to see how CTA-related injunction and court proceedings develop before providing information required by the CTA to the government.
In either case, we ask our business-owning clients to contact us and let us know if they want us to assist them to file a BOIR, as the original reporting deadline was the end of the year 2024, or if they would like to watch and wait. We cannot guarantee that the government will give relief to filers who choose to watch and wait if the injunction is lifted prior to year end.
Businesses That Are Required to File a BOIR Through the CTA
More than 32 million businesses are targeted by the CTA’s BOIR requirements. The requirements are meant to be broad and include any entity reporting to the secretary of state or a similar office at the state level. That covers the following business types:
- Corporations – C-corps and S-corps
- Limited liability companies (LLCs)
- Limited liability partnerships – and most limited partnerships
- Certain Trusts (Not all states require trusts to register)
Both domestic and foreign entities are required to file a BOIR if they are registered to do business in any U.S. state.
Exempt entities include non-profit organizations, inactive businesses and large companies. Certain industries are also exempt if they already provide the relevant information to the government. This includes banks, credit unions, depository holding institutions, securities exchanges and money servicing businesses. Sole proprietorships are also exempt and, of course, so are government institutions.
Information That Must be Included in a BOIR
Beneficial owner information reports will be gathered and processed by the Financial Crimes Enforcement Network (FinCEN). The stated goal is to uncover various illicit activities – including money laundering and drug trafficking – by identifying shell companies and similar deceptive methods. BOIRs provide the information FinCEN requires to crack down on such entities. Each BOIR must include:
- The company’s legal name, address and taxpayer identification number
- Each beneficial owner’s legal name, personal address, date of birth and identification number on a government-issued ID
- A copy of the identification document used to ID the beneficial owner
Beneficial owners are individuals who either own at least 25 percent interest in a business, or otherwise exert substantial control over the entity’s operations.
What’s Next for the CTA and Filing Entities?
The injunction was filed in tandem with a lawsuit alleging government overreach. Specifically, that Congress should not be authorized to enforce reporting requirements through the CTA, as doing so is beyond the scope of the government’s power to regulate commerce.
The injunction filed against the CTA was a preliminary injunction – one meant to halt FinCEN’s enforcement until the courts can take a closer look at the substance and determine the constitutionality of the CTA and reporting requirements. There is no clear timeline as to when the injunction could be lifted, but it could occur before year end or take months if not years before it resolves.
As such, it’s up to business owners to determine how to proceed. It is a matter of weighing whether to satisfy government regulations or exercising caution with disclosing information to the government for a regulation which may or may not be found constitutional.
No matter which direction you or your organization decides to take, Evident Pros can support that decision by filing your BOIRs or continuing to monitor the progress of the case and injunction. We ask that you just let us know how you wish to proceed so we can plan accordingly.
- Inside the Loophole – CTA Injunction - December 4, 2024
- Inside the Loophole – Thanksgiving 2024 - November 22, 2024
- Inside the Loophole – November 2024 – Have You Filed Your BOI? - November 21, 2024