FinCEN
Today is the day! March 21, 2025, serves as the deadline for most businesses to report their beneficial ownership information (“BOI”) under the Corporate Transparency Act (“CTA”). But not so fast! While the prior statement is technically accurate, the situation has been complicated by statements and assurances from the U.S. Department of Treasury and the Financial Crimes Enforcement Network (“FinCEN”). Here’s why.
March 21 Deadline
Over the past few months, we have closely followed and analyzed the ongoing developments surrounding the CTA in our blog posts. This ever-evolving saga has included nationwide injunctions and stays—both imposed and lifted—as well as multiple extensions of the BOI reporting deadline. You can review our previous posts here:
- Corporate Transparency Act reporting deadline remains January 1, 2025
- Federal court puts Corporate Transparency Act ownership reporting on hold
- Federal Appeals Court Reinstates Corporate Transparency Act Reporting Requirements
- Corporate Transparency Act Reporting Requirements Suspended Once Again . . . For Now
- SCOTUS to Decide Fate of Nationwide Injunction Against Corporate Transparency Act
- SCOTUS Allows Corporate Transparency Act Reporting Requirements to Resume
- Corporate Transparency Act Whiplash: Reporting Requirements Still on Hold
- BOI is Back!
In short, after navigating multiple legal challenges, the original BOI reporting deadline for most businesses of January 1, 2025, was extended to March 21, 2025. However, despite this official deadline, statements and assurances from FinCEN and the U.S. Department of Treasury have added further complexity to the situation.
Promises made, promises kept?
On February 27, FinCEN announced that it would not impose fines, penalties, or any other enforcement actions against companies that fail to file or update their BOI reports by the March 21 deadline. FinCEN clarified that this “non-enforcement action” will remain in effect until a forthcoming final rule takes effect. As of this publication, FinCEN has yet to release the proposed final rule that is expected to provide further guidance and clarity on the CTA’s reporting requirements.
But the assurances didn’t stop there. On March 2, the U.S. Department of Treasury announced that the “non-enforcement action” would continue for all domestic reporting companies and beneficial owners even after FinCEN’s forthcoming rule is issued and takes effect. In essence, the Treasury has committed to not enforcing the CTA against domestic companies and owners required to file BOI reports under the Act. However, this relief will not extend to foreign reporting companies, which will be required to comply with the CTA’s reporting requirements. Additionally, the Treasury has pledged to propose a rule that would formally limit the CTA’s scope to foreign reporting companies only.
It’s important to recognize that, until these proposed rules are officially enacted, the promises made remain just that—promises. As of now, no formal rule or regulation prevents the enforcement of the CTA against domestic companies and owners. Until these assurances are solidified into law, businesses should consult with their legal counsel to determine the best course of action regarding CTA compliance.
Additionally, there has been considerable discussion suggesting that these promises and proposed rules effectively eliminate the CTA for domestic companies and owners. However, that is not entirely accurate. If implemented, these proposed rules would be administrative in nature and remain in effect only as long as the current administration permits. As with any administration change, a future administration could introduce new rules that reinstate all aspects of the CTA, including reporting requirements for domestic companies and owners.
For some "light" reading, feel free to check out our blog post on the Principles of Government, where we discuss federal agencies and the powers granted to them.
On the horizon.
Legal Challenges of CTA. The CTA continues to face several legal challenges nationwide questioning its constitutionality. Two of the most notable cases, which introduced the nationwide injunction and stay, are the Texas Top Cop Shop case and the Smith case, both currently before the federal district court in Texas. These cases challenge the constitutionality of the CTA, and the court's ruling could have significant implications for the future of the law. The situation is further complicated by a division among courts across the country regarding the CTA’s constitutionality. While some courts have upheld the CTA as constitutional, others have found it likely unconstitutional and issued more limited injunctions against its enforcement. In summary, the outcome remains uncertain. It appears that this issue is ultimately headed to the Supreme Court of the United States for final determination.
Legislation. There are several legislative proposals that could impact the CTA. One such proposal, the Protect Small Businesses from Excessive Paperwork Act of 2025, aims to extend the BOI filing deadline for most businesses to January 1, 2026. The bill has already passed the House of Representatives and is now in the Senate, where it has been referred to the Committee on Banking, Housing, and Urban Affairs. Additionally, there are bills in both the House and Senate seeking to repeal the CTA entirely. H.R. 425 and S.100, both titled the Repealing Big Brother Overreach Act, aim to fully overturn the CTA, though they have not seen significant progress since their introduction.
Legal Challenges of Promises Made. To further complicate matters, the Treasury Department’s current stance on suspending enforcement of the CTA against domestic reporting companies and owners may face its own set of legal challenges. Given the significance of the CTA, it is likely that the "non-enforcement action" will undergo intense scrutiny, litigation, and could potentially lead to legislative action. Should this occur, it raises the possibility that the CTA could remain fully enforceable, with reporting requirements for domestic companies and owners intact. This ongoing uncertainty underscores the need for businesses to stay informed and proactive about potential changes and developments.
What Should Businesses Do Now?
With enforcement actions in limbo, businesses should:
- Stay informed. Due to the ongoing legal challenges, proposed legislation, and potential future legal disputes, businesses should stay up-to-date on the status of the CTA and its enforcement. The situation appears to be evolving almost daily.
- Counsel. Businesses should consult with their legal counsel to determine the best course of action regarding the CTA. Taking a risk-averse approach may provide peace of mind, while a wait-and-see strategy could lead to unforeseen consequences.
Conclusion
At this moment, it appears that no fines or penalties will be imposed on businesses that fail to meet the March 21 deadline for BOI reporting. However, given the unpredictable nature of BOI and the CTA, things can change quickly. The CTA has been a dramatic journey, filled with unexpected twists, cliffhangers, and surprising developments. However, the story is far from over. We will continue to keep you updated on the latest changes and progress of the CTA until we reach a final resolution.
Tags: corporate transparency act, BOI, BOI Reporting, CTA, Business, FinCEN, U.S. Department of Treasury
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The Supreme Court of the United States (“SCOTUS”) has issued its decision concerning the nationwide injunction against the Corporate Transparency Act (“CTA”) and its beneficial ownership information (“BOI”) reporting requirements.
On Thursday, January 23, 2025, SCOTUS ruled to allow the Government to enforce the CTA, which requires millions of businesses to file BOI reports. The justices stayed, or lifted, the nationwide injunction that had been blocking the CTA's enforcement. This decision permits the government to proceed with implementing the CTA while its merits are reviewed by the U.S. Court of Appeals for the Fifth Circuit, which is scheduled to hold oral arguments on March 25.
What does this all mean?
Although this decision lifted the injunction against the CTA, there is another lawsuit that has placed the CTA reporting requirements on hold. See our post on the Smith v. U.S. Department of the Treasury for more information. As of the time of this publication, the Financial Crimes Enforcement Network (“FinCEN”) of the U.S. Department of Treasury has updated their website to confirm that businesses are not currently under any obligation to file BOI reports. Business owners are encouraged to visit the FinCEN website regularly to stay informed about the latest reporting requirements and deadlines.
The push to repeal the CTA goes beyond the court system.
While multiple lawsuits have been filed challenging the constitutionality of the CTA, there has also been legislative activity aimed at repealing it. Representative Warren Davidson and Senator Tommy Tubervillehave reintroduced legislation in their respective chambers of Congress to repeal the CTA. These proposals were introduced in the previous congressional session but did not advance. With the new administration and a Republican majority in both chambers of Congress, it will be interesting to see how these efforts progress.
How do I file a BOI report?
Business owners can still voluntarily complete all BOI reporting by visiting the FinCEN website. There is no cost to file a BOI report. However, if a business engages a tax professional, attorney, or other third party to file a BOI report on its behalf, the business will be responsible for covering any professional fees associated with the preparation and submission of the report.
Reporting companies will need the following information: (1) the reporting company’s legal name, (2) tax identification number, (3) jurisdiction of formation, and (4) current U.S. address. For their beneficial owners, reporting companies will need the following information: (1) full legal name, (2) residential address, (3) a form of identification, which must be either a state issued driver’s license, a state/local/tribe-issued ID, a U.S. passport, or a foreign passport, and (4) an image of the identification used in number (3). See our law bulletin for more details on reporting requirements.
Conclusion.
For now, businesses are not required to file BOI reports with FinCEN. However, should the Government appeal the decision in the Smith case, things could change. As always, we will try our best to keep you informed of the latest developments.
Tags: Supreme Court of the United States, SCOTUS, BOI, CTA, corporate transparency act, beneficial ownership information, BOI Reporting, FinCEN, injunction, stay, legislation, Business, Business Owners, beneficial owners
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In a recent blog post, we discussed a federal district court’s issuance of a nationwide injunction against the Corporate Transparency Act (“CTA”), temporarily halting the requirement for businesses to file “beneficial ownership information” (“BOI”) reports with the Department of the Treasury’s Financial Crimes Enforcement Network (“FinCEN”). In that post, we promised to keep you updated on the legal status of the CTA and its BOI reporting requirements. Well, we are here to tell you that the saga continues . . .
As of December 23, 2024, that nationwide injunction is no longer enforceable, and the BOI reporting requirements of the CTA have been reinstated. The Court of Appeals for the Fifth Circuit issued a temporary stay on the nationwide injunction. The Fifth Circuit found that the government made a strong showing that it is likely to succeed in proving that the CTA is constitutional. The court explained that Congress exercised its broad authority under the Commerce Clause to pass the CTA, aiming to regulate the anonymous ownership and operation of businesses that constitute an "economic class of activities" significantly affecting interstate commerce. Consequently, the court determined that the reporting requirement for such businesses is within the scope of the Commerce Clause.
The court further concluded that “a last-minute injunction of a statute proposed and passed by the people’s representatives inevitably causes irreparable harm.” Additionally, the court determined that the burden on businesses required to report is minimal. When weighed against the “public’s urgent interest in combatting financial crime and safeguarding national security,” the court found that a stay of the injunction was justified.
Following the Fifth Circuit's ruling, the Department of the Treasury issued an alert on the FinCEN website acknowledging that reporting companies may require additional time to comply with the CTA due to the period when the preliminary injunction was in place. As a result, the reporting deadlines have been extended as follows:
- Reporting companies established or registered before January 1, 2024, now have until January 13, 2025, to submit their initial BOI reports to FinCEN. (Previously, these companies were required to report by January 1, 2025).
- Reporting companies formed or registered in the United States on or after September 4, 2024, and before December 3, 2024, have until January 13, 2025, to submit their initial BOI reports to FinCEN.
- Reporting companies formed or registered in the United States between December 3, 2024, and December 23, 2024, have an additional 21 days beyond their original filing deadline to submit their initial BOI reports to FinCEN.
- All reporting companies created or registered in the United States on or after January 1, 2025, have 30 days to file their initial BOI reports with FinCEN.
So, what does it all mean?
If your farm business is registered in Ohio, compliance with the CTA's reporting requirements is once again mandatory. While farm businesses now have a slight extension to meet the BOI reporting requirements, it is probably best practice not to delay too long.
This situation is unfolding quickly. This case may still undergo further review by the Fifth Circuit or potentially reach the Supreme Court of the United States. Additionally, several other federal courts are currently evaluating challenges to the CTA. We will make every effort to keep you informed promptly as the situation develops.
If you are one of those farm businesses putting off the requirement to file “beneficial ownership information” (BOI) to the federal government under the new Corporate Transparency Act (CTA), you just received an early Christmas present from a federal court in Texas. The U.S. District Court for the Eastern District of Texas has issued a nationwide preliminary injunction against the CTA, concluding that the law “appears likely unconstitutional.” The court halted enforcement of the CTA and its regulations (the Reporting Rule) and stayed the January 1, 2025 deadline for BOI reporting.
What is the CTA?
The CTA is a new federal law that requires certain businesses to report the identities of those with “beneficial ownership interests” in the business to the federal Department of Treasury’s Financial Crimes Enforcement Network. The CTA’s first reporting deadline was set to be January 1, 2025.
The parties who brought the lawsuit
Six Plaintiffs filed the lawsuit against the United States -- a private individual, three businesses, the Libertarian Party of Mississippi, and the National Federation of Independent Business. The parties claimed that the CTA and its regulations are unconstitutional on several grounds: first, for violating State’s rights under the Ninth and Tenth Amendments; second, for violating the First Amendment by compelling speech and burdening rights of association, and third, for violating the Fourth Amendment by forcing disclosure of private information.
The court’s analysis
Stating that whether the CTA and its rules are absolutely unconstitutional “is a question for another day,” the court instead focused its opinion on its duty to determine whether the Plaintiffs satisfied the proof necessary for being awarded the “extraordinary relief” of an injunction. Doing so required the court to examine the elements a plaintiff must prove to receive an injunction. The court’s opinion consumes 79-pages, but here’s a snapshot of the court’s analysis of the required elements:
- That the CTA and Reporting Rule substantially threaten the plaintiffs with irreparable harm. The Plaintiffs presented two arguments that they would suffer irreparable harm by complying with the CTA reporting requirements. First, Plaintiffs claimed they would have to expend resources, spend time and effort, and incur compliance costs and legal expenses. Second, they argued that their constitutional rights would also be irreparably harmed because the fear of noncompliance and criminal punishment would force them to reveal protected information. The court agreed that Plaintiffs would suffer irreparable harm in both the form of compliance costs and substantial threats to their constitutional rights. In doing so, the court rejected the federal government’s argument that reporting costs would be minimal and “not a heavy lift.
- A substantial likelihood of success on the merits of any of their challenges. The lengthiest part of the court’s decision is its analysis of whether the Plaintiffs are likely to be successful in their argument that the CTA is unconstitutional. Plaintiffs raised several constitutional challenges, but the court addressed only the Tenth Amendment claim that Congress exceeded its authority by passing the CTA. The government first argued that the Constitution’s Commerce Clause authorized the CTA, but the court determine that the CTA appears to be a “substantial expansion of commerce power” because it neither regulates economic activity nor non-economic activity among the states, but instead “regulates reporting companies simply because they are registered entities and compels disclosure of information for a law enforcement purpose.” Likewise, the court rejected the government’s second argument, that the Constitution’s Necessary and Proper clause authorized it to enact the CTA as a necessary and proper extension of its power to regulate commerce and foreign affairs and to lay and collect taxes. The court found “no constitutional solace” in any of the government’s arguments, however. The Plaintiffs had a substantial likelihood of of proving their claim that the CTA exceeds Congress’ authority and violates the Tenth Amendment, the court concluded.
- That the threatened harm outweighs any damage the injunction might have on the Government and that preliminary injunctive relief will not harm the public. A final question the court deliberated is the “balancing of the equities,” or whether the threatened injury to Plaintiffs by not granting the injunction outweighs any potential harm to the government from issuing the injunction. The court quickly concluded that because the Plaintiffs’ injuries are concrete and because it is in the best interest of the public to prevent a violation of a party’s constitutional right by allowing enforcement of the CTA, the balance of equities favors issuing an injunction.
The extent of the injunction
The court’s final deliberation was whether the injunction should apply nationwide or only to the Plaintiffs, and whether it should also prevent enforcement of the CTA’s Reporting Rule and put the January 1, 2025 compliance deadline on hold. Given that the CTA applies nationwide to nearly 33 million businesses, the court held that the extent of the potential constitutional violations Plaintiffs alleged would be best served through a nationwide injunction of the CTA and its Reporting Rule. Combined with a stay of the compliance date, the nationwide injunction will maintain the status quo and protect the parties from irreparable harm pending further review of the Plaintiffs’ claims.
What does the case mean for farm businesses?
Businesses who haven’t yet filed their BOI information with the Department of Treasury’s Financial Crimes Enforcement Network are not currently required to do so, and the Department of Treasury cannot enforce the law or issue penalties against businesses who do not report. Note that the court case did not address or include any remedies for businesses that have already filed BOI information. But the lawsuit is not over and there will be further legal proceedings on both the constitutional challenges and the issuance of the injunction (UPDATE: The federal government filed an appeal of the court's decision on December 5, 2024). For now, businesses might want to consult with their legal counsel and be prepared to file if the injunction is lifted. If that occurs, there is likely to be advance notice or an extension of time granted for filers to come into compliance.
Expect to hear more from us in the future on the legal status of the CTA and its BOI reporting requirements.
Tags: corporate transparency act, beneficial ownership information, BOI, FinCEN, CTA
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Written by Tyler Zimpfer, NALC Law Fellow with the OSU Agricultural & Resource Law Program
The Corporate Transparency Act (“CTA”), enacted in 2021, requires “reporting companies” to file documents with the federal government indicating beneficial ownership information (BOI) for the business. Earlier this year, the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) began accepting BOI filings from certain companies doing business in the United States. While reporting has begun, several legal disputes have sprung up around the country challenging the constitutionality and enforcement of the CTA. Despite the ongoing litigation, however, the initial filing deadline of January 1, 2025 remains in effect for businesses subject to the CTA.
Recent litigation challenging the CTA
On March 1, 2024, a U.S. District Court in Alabama ruled that the CTA exceeded Congress’ enumerated powers and therefore was unconstitutional. The court held that “the CTA exceeds the Constitution’s limits on the legislative branch and lacks a sufficient nexus to any enumerated powers to be necessary or proper means of achieving Congress’ policy goals.” Specifically, the court concluded that Congress exceeded its foreign affairs, taxing, and commerce powers. Interestingly, the court did not decide on the arguments that the CTA also violates the First, Fourth, and Fifth Amendments to the U.S. Constitution.
The court prevented enforcement of the CTA against only the specific plaintiffs in the case – the National Small Business Association (NSBA) and one of its individual members. While NSBA members currently avoid any reporting requirements, CTA compliance is still required for all other companies. Therefore, the injunction imposed by the court lacks a significant, practical impact for all other businesses for the time being.
The United States has appealed the case, but most experts are not expecting a decision from the federal Court of Appeals for the Eleventh Circuit before the January1, 2025 deadline. When a decision is released, the losing party will likely appeal to the United States Supreme Court, dragging a final determination out even further.
Six other lawsuits have been filed in other federal district courts around the country, each expecting to last longer than the upcoming filing deadline. Long story short, the legal saga of challenges to the CTA is likely to continue for the foreseeable future.
Click here to read the recent U.S. District Court opinion from Alabama.
What the CTA requires
Several key terms of the CTA explain which companies the law affects and what a company must report by January 1, 2025:
- “Reporting companies” subject to the CTA includes any domestic or foreign corporation, limited liability company, or any other entity that is formed or registered to do business in a U.S. state by filing a document with the secretary of state or other similar office. Several exceptions exist for those industries already subject to government oversight.
- A “reporting company” must disclose certain information about the company and its “beneficial owners.” The reporting information includes the full legal name and the IRS taxpayer identification number of the company. BOI includes full legal name, address, and either an image of a U.S. passport, driver’s license, or other identification document issued by a state, local government, or tribe of each "beneficial owner."
- A “beneficial owner” is any individual who, directly or indirectly, exercises substantial control over the reporting company or owns or controls at least 25% of the ownership interests of a reporting company. There is no limit to how many beneficial owners a company may have.
To read specifics about the mechanics and submission guidelines of the CTA, please see our law bulletin, The Corporate Transparency Act: Reporting Requirements, published earlier this year.
What does the CTA mean for farming entities in Ohio?
Many farming entities should be uniquely aware of the new BOI reporting obligations of the CTA. The CTA does not have specific industry exemptions for agriculture but takes a broad sweep at any entity that may be formed as a shell company. However, notable exceptions to the mandates of the CTA that affect farming entities include sole proprietorships and general partnerships, which are exempt from CTA because they are not required to register with Ohio’s Secretary of State.
Farming entities classified as "reporting companies," such as most farm limited liability companies (LLCs), are required to report relatively straightforward ownership information. However, gathering the necessary details, like driver's licenses or other forms of identification, can be time-consuming. A scenario to take note of arises when an individual, despite owning only a small percentage of the company, is responsible for making many of the key short- and long-term decisions. This often occurs when management is passed to the next generation, while the older generation retains the majority of ownership. Under the Corporate Transparency Act (CTA), an individual who exercises significant management control must submit beneficial ownership information to FinCEN, even if their ownership stake is relatively small.
Additionally, any BOI updates such as a son or daughter being legally included in ownership of the farm’s assets or a beneficial owner's change of address must be reported within 30 days of the change. Forgetting to timely update the government may result in significant penalties for the company or a beneficial owner.
Moving forward
Farming entities that qualify as reporting companies should still expect to file information with FinCEN by January 1, 2025 as required by the CTA. Less than 10% of qualifying entities have filed with FinCEN so far, suggesting a delay in reporting or uncertainty regarding the District Court’s ruling in Alabama. Depending on current pending litigation, the CTA’s mandates may be adjusted or eliminated. Bills introduced in the U.S. House of Representatives and the U.S. Senate have also been proposed to modify or repeal the CTA, but no significant action has occurred on the proposals.
As litigation and legislation proceed, updates on the cases and bills will be forthcoming. In the meantime, farming entities should work with their attorneys, accountants, and other professionals knowledgeable of the new CTA obligations to meet the initial and future reporting requirements of the CTA.
Tags: corporate transparency act, CTA, beneficial ownership information, BOI, FinCEN
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