Millions of American businesses collectively must feel like a soccer ball kicked between the U.S. Financial Crimes Enforcement Network (FinCEN), various parties opposed to Beneficial Owner Information reporting required by a 2021 law, and the courts. That is, if businesses even know they’re the objects of the kicking.
On Dec. 26, the Fifth Circuit Court of Appeals in New Orleans, La., reinstated an injunction against enforcement of the 2021 Corporate Transparency Act (CTA) requirement that businesses report beneficial ownership information (BOI). The reinstatement came only three days after the same court had lifted an earlier injunction against BOI enforcement.
Under the CTA, more than 32 million American businesses were required to report BOI to FinCEN beginning Jan. 1, 2025. BOI reporting is not simply a matter of a business supplying the names of its owners to the government. If that were the case, FinCEN wouldn’t need to supply a 122-item Frequently Asked Questions page to explain everything necessary to comply with the law. In April 2021, the American Bar Association published an out-of-the-gate assessment of the BOI requirement:
The Corporate Transparency Act is intended to provide law enforcement with beneficial ownership information for the purpose of detecting, preventing and punishing terrorism, money laundering and other misconduct through business entities.
It places a significant burden on small businesses required to collect beneficial ownership information.
More clarity and precision with respect to the requirements is required reduce the burden on reporting companies and applicants as well as increasing compliance and the value of the information reported.
Here’s the breakdown of who, and when, in the latest back-and-forth of dueling court orders:
- Dec 5: the U.S. District Court for the Eastern District of Texas issued a nationwide injunction against the BOI reporting requirement. The Department of Justice appealed the ruling.
- Dec 23: the Fifth District Court of Appeals lifts the injunction; FinCEN moves the reporting deadline to Jan. 13, 2025.
- Dec 26: the Fifth District Court of Appeals reinstates the injunction. Everything is in flux again.
- Jan. 3: The DOJ asks the Supreme Court to block the injunction. The Supreme Court set a deadline for Friday, January 10 at 4.pm. ET for the plaintiffs to respond.
FinCEN says businesses can voluntarily submit BOI information, but, as of this moment, there is no legally compelling reason to do so. But it’s not as if businesses had been speeding to comply; in November, only 6.5 million of 32 million businesses had complied with BOI reporting information.
This game is not over, and a good bit more kicking will occur before the whistle blows.
