BOI Injunction Lifted, Supreme Court Ruled- Enforcement Still on Hold Due to Smith Case
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Here is the recent history.
The bill passed Friday, December 20, to avert a federal government shutdown. ?DIDN'T include a one-year extension to the deadline for companies to file Beneficial Ownership Information (BOI) reports. ?The extension had been included in an initial version of the bill to extend the filing requirement to avoid a $591/day failure to file penalty that goes into effect on January 1, 2025, for an additional year.
There WAS an injunction issued by a Texas Federal Court preventing FinCEN from enforcing the CTA or imposing any penalties for non-compliance. ?The Department of Justice (DOJ) had asked the Fifth Circuit Court of Appeals to rule on its request for a stay by December 27, 2024, "to ensure that regulated entities can be made aware of their obligation to comply before January 1, 2025." If the injunction is lifted on December 27, approximately 27 million businesses will be scrambling to file before the deadline.
On December 23, 2024, the Fifth Circuit Court of Appeals issued a stay on the district court's nationwide injunction against the Corporate Transparency Act (CTA). ?This stay reinstates the BOI reporting requirements and prior deadlines at this time.
The court found that the government will likely succeed on appeal, citing Congress's authority under the Commerce Clause and the critical need for corporate transparency to combat financial crimes like money laundering and terrorism financing.
Monday, December 23, 2024, FinCEN extended the filing deadline to January 13 for most companies.? As of December 23, 2024, approximately 24 million businesses have 22 days to file a report to avoid a penalty of $591/day.
On Thursday, December 26, 2024, a federal appeals court reinstated a nationwide injunction halting enforcement of beneficial ownership information (BOI) reporting requirements, reversing an order the same court issued earlier this week.
In its latest order, the Fifth Circuit Court of Appeals said it was reinstating a lower court's injunction " to preserve the constitutional status quo while the merits panel considers the parties' weighty substantive arguments," referring to the panel of judges deciding the appeal.
On 12/31, the U.S. Department of Justice (DOJ) filed an emergency application with the Supreme Court seeking a stay of a district court's nationwide injunction blocking enforcement of the Corporate Transparency Act (CTA). ?Decisions on emergency stay applications at this level are often made quickly—within days or weeks—especially when enforcement of laws is halted nationwide.?
This new Supreme Court filing will likely lead to a next step on BOI enforcement before the scheduled February dates for the appeal case. ?January deadlines could be reinstated should the Supreme Court take action and issue a stay.
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On January 23, 2025, the U.S. Supreme Court granted the government's emergency request for a stay today, thereby eliminating the nationwide injunction and reinstating enforcement of the Corporate Transparency Act (CTA) and its Beneficial Ownership Information (BOI) reporting requirements.
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The Supreme Court decision only addresses the nationwide preliminary injunction issued by the Eastern District of Texas, not the underlying case, which continues on appeal in the Fifth Circuit. ?Oral arguments for the appeal, which have been expedited, are still scheduled for March 25, 2025.
But, a separate nationwide injunction issued by a different court on January 7 now takes precedence, as only the earlier injunction was lifted by the Supreme Court. Accordingly, Treasury’s FinCEN is treating reporting under the CTA as voluntary for the time being.
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What Does Yesterday's Supreme Court Decision Mean For Reporting Companies?
Our Strong Recommendation: Voluntary Filing
Given the fracas surrounding BOI reporting and the potential for deadlines to be reinstated quickly, we strongly recommend voluntary filing. This proactive step ensures your compliance and allows you to avoid:
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Overview
Beneficial Ownership Information (BOI) reporting applies to affected entities in existence on January 1, 2024, as well as those created in 2024 and later. ?Whether these are single-member LLCs, small multi-member LLCs, small S corporations, or small C corporations, they may be required to provide detailed reporting on their beneficial owners.? These humans own or control these entities.
The new FinCEN reporting applies to many of your clients' businesses (and rental properties owned in LLCs). ?The details and nuances may shock you.
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Generally, reportable small corporations and LLCs are those with
·???????? 20 or fewer full-time employees.
·???????? $5 million or less in domestic gross receipts reported on their prior tax return.
·???????? A physical U.S. presence.
To ensure compliance, the penalties for willfully violating the BOI?reporting requirements include
·???????? Civil penalties of up to $591 for each day a violation is not remedied.
·???????? A criminal fine of up to $10,000.
·???????? Possible imprisonment of up to two years.
There's no limit to the number of people subject to these penalties. ?Senior managers, corporate entities, and others can be liable for willful BOI filing rules violations.
·???????? Anyone who willfully files a false or fraudulent BOI report on a company's behalf.
·???????? Anyone who willfully provides false information to the filer of a BOI report.
·???????? Beneficial owners who willfully fail to file a BOI report or file a false report, including corporate officers, directors, or employees and LLC members, employees, and trustees.
The new regulations are designed to enhance transparency, making it more challenging to conceal illicit activities through anonymous corporate structures. ?While you may operate with integrity, you nevertheless will likely have to file with FinCEN.
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What Businesses Should Do Now
?You don't have to do anything if your business has already filed its BOI report.
?If you have a change that requires updating your report, you can wait to file it until the injunction is lifted or there is another resolution.
You can do so even while the injunction is in effect if you haven't yet filed your BOI report. ?But you aren't legally required to file a BOI report while the nationwide injunction is in effect.
If you would rather not file a BOI report, you can wait and see if the injunction is lifted.
Be aware, though, that if the injunction is lifted, you might not have much time to file your BOI report. ?That was true when the Fifth Circuit ruled on December 23 that companies had to file but gave them only a week to do so.
If a new deadline is established, your available time to prepare could be as short as 13 days. ?To be ready to act quickly, you should gather the information you need to file.
Also, pay attention to the latest developments to know if and when the courts rule that you must file. ?Thinking about it in this way, you might find it easier to file, so you don't have to pay attention or worry.
Ignoring the new reporting requirements is not an option—staying current on these changes is key to navigating this new landscape successfully.
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