Episode #71 – CTA and BOI, Oh my!

12/26/24 Update - I wish I were making this up, but the filing requirements are on hold again.

As of 12/23/24 - Lifted: Nationwide injunction halting the enforcement of BOI reporting — filing deadline is Jan. 13, 2025

A federal district court, finding that the Corporate Transparency Act (CTA) is likely unconstitutional, issued an order on December 3 prohibiting the enforcement of the CTA and the beneficial ownership information (BOI) reporting rule in the CTA’s accompanying regulations. Under this injunction, the Financial Crimes Enforcement Network (FinCEN) was barred from enforcing BOI filing requirements while the case was pending.

On December 5, the Department of Justice (DOJ) filed a formal notice of appeal to the Fifth Circuit court, seeking a stay of the injunction and challenging the injunction that prevented FinCEN from enforcing BOI reporting nationwide.

On December 13, the Attorney General filed an emergency motion to stay the injunction that prevented FinCEN from enforcing the BOI required reports.

On December 23, the Fifth Circuit Court granted FinCEN’s appeal to lift the injunction on BOI reporting. The AICPA is pushing FinCEN for a delay.

Until we hear otherwise, the BOI filing deadline is Jan. 13, 2025.

12/5/2024 Update - Nationwide injunction halts BOI reporting for now.

A federal district court, finding that the Corporate Transparency Act (CTA) is likely unconstitutional, issued an order Tuesday prohibiting the enforcement of the CTA and the beneficial ownership information (BOI) reporting rule in the CTA's accompanying regulations.

The injunction, which applies nationally, was issued in Texas Top Cop Shop, Inc. vs. Garland, No. 4:24-CV-478 (E.D. Texas 12/3/24).

Under the injunction, the CTA and the BOI reporting rule cannot be enforced, and reporting companies need not comply with the CTA's Jan. 1, 2025, BOI reporting deadline pending a further order of the court.

While I’ve spoken about this topic before, I had high hopes that it would have been eliminated by now. I do understand the ultimate goal behind it, but I don’t think it will be effective. And, there are other ways already in place that accomplish this intent.

What is the Corporate Transparency Act (CTA)?

The Corporate Transparency Act, or CTA, is a law passed by Congress in 2021. It's part of a bigger effort to stop bad guys from using fake companies to hide illegal money or activities. The CTA says that most companies in the U.S. need to tell the government who really owns or controls them.

When did the CTA start?

The CTA became law on January 1, 2021. But the rules for reporting company ownership information didn't start right away. The reporting provision became effective on January 1, 2024.

What is Beneficial Ownership Information (BOI) Reporting?

BOI stands for Beneficial Ownership Information reporting. BOI reporting is a big part of the CTA. The BOI report is how companies will tell the government about their real owners and who controls them. This helps stop people from using fake companies to do illegal things.

It has the potential to be a one-time filing – there’s the initial filing and an updated BOI report only needs to be filed if there are any changes to the initial information reported.

Check out my blog post HERE that is a good summary of the reporting requirements.

Who does it affect?

Most small business owners will have to deal with BOI. It comes with big fines if you don't follow the rules.

What's happening now?

As of September 2024, the updates are:

• There have been a few different challenges as to whether the law is even allowed by the Constitution. 

• Several lawmakers are asking if we can delay BOI or make it simpler. 

What's the problem?

There are several problems with the BOI report.

1. It's complicated. Even the words used in the law are hard to understand.

2. A lot of small business owners don't know about it yet.

3. There are tough punishments if you don't do it right - up to $10,000 in fines and two years in jail!

How many businesses have done BOI so far?

Only about 2 million out of 32 million businesses have filed their BOI. That's less than 10%!

Why haven't more businesses done it?

• Businesses that existed prior to January 1, 2024, have until January 1, 2025 to file. So, some are waiting.

• Many people don't know about it.

• Some businesses are aware about the reporting requirements, but they aren't sure how to file their BOI.

What's being done about it?

• FinCEN – Financial Crimes Enforcement Network – is the department overseeing this process. FinCEN is starting to teach people about BOI.

• FinCEN has updated their website with more info.

• FinCEN is holding meetings to explain BOI.

What should you do?

If you own a business, you should learn about BOI. You might need to file by January 1, 2025. Don't wait until the last minute! 

If you need help, start with your trusted professional team. But be prepared that some accountants are unable to file a BOI report for their clients due to constraints of their professional liability insurance carrier and some legal circles have concluded that advising clients on BOI is a practice of law.

What's next?

We're hoping the government will give us more time or make BOI clearer. But for now, we need to get ready to follow the rules.

Remember, BOI isn't just a one-time thing. You must keep updating your info when things change in your business. It's a lot of work, but it's important to do it right to avoid those big fines!

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