Beneficial Ownership Information Update

As business owners, many of you are familiar with or have at least been made aware of a new federal law which requires business owners to submit a Beneficial Ownership Information (“BOI”) report with the Financial Crimes Enforcement Network (“FinCEN”), a bureau within the United States Department of the Treasury.

In 2021, Congress passed the Corporate Transparency Act, which in part, requires certain companies to report “beneficial ownership information”, or information regarding the people who ultimately own or control the company, to FinCEN as part of a concerted effort to eliminate illicit business activities often involving the use of shell companies or other opaque ownership structures. This requirement applies to corporations, limited liability companies, and other similar entities that were created or registered to do business before January 1, 2024. The initial deadline for this reporting requirement was January 1, 2025, but as set forth below, there is currently no deadline in effect. Importantly, the penalties for non-compliance are significant, potentially up to $591 per day for a willful violation.

On Tuesday, December 3, 2024, the U.S. District Court for the Eastern District of Texas issued an order granting a nationwide preliminary injunction on the BOI reporting requirement. The Department of Justice, on behalf of the Department of Treasury, immediately filed an appeal and separately sought a stay of the injunction pending that appeal. On December 23, 2024, a panel of the U.S. Court of Appeals for the Fifth Circuit granted a stay of the district court’s preliminary injunction, which reinstated the mandatory reporting requirement. However, on December 26, 2024, a different panel of the U.S. Court of Appeals for the Fifth Circuit issued an order vacating the Court’s December 23, 2024 order, effectively reinstating the preliminary injunction. Ultimately, this means that the BOI reporting requirement is voluntary, and reporting companies are not currently required to file BOI reports with FinCEN.

We anticipate that this reporting requirement will continue to be a topic of concern, most likely at the United States Supreme Court, so we will monitor this situation and provide updates to IFDF members as soon as possible. Please do not hesitate to contact me if you have any questions.

Best,

Luke J. Grabowski

Partner │Attorney at Law