Navigating the Corporate Transparency Act: What You Need to Know About BOI Reporting

FinCEN BOI Reports: What Finance Professionals Need to Know

The Corporate Transparency Act (CTA) has brought significant changes to business compliance requirements since it took effect on January 1, 2024. For finance professionals, this presents an opportunity to guide clients through a complex legal landscape.

However, with court rulings creating uncertainty around the Beneficial Ownership Information (BOI) filing process, many are left asking: should businesses file now or wait?

Here’s an in-depth look at the current state of the CTA, what it means for your clients and actionable insights to navigate this shifting terrain.

What Is the CTA, and Who Does It Affect?

The CTA was introduced to combat financial crimes like money laundering and fraud by increasing transparency in business ownership. It mandates that most corporations and LLCs file a BOI report with FinCEN. These reports identify individuals who own or control the entity.

Although this information remains confidential and is accessible only to law enforcement, failure to comply carries steep penalties—fines of up to $10,000, potential imprisonment, and daily civil penalties of $591.

The original deadline for businesses formed before 2024 was January 1, 2025. Entities created in 2024 had 90 days from their formation to comply.

The Legal Battle and Filing Uncertainty

Recent court decisions have put the CTA’s enforcement in question. Here's a timeline of key events:

1. December 3, 2024: A Texas federal court issued an injunction, temporarily halting the filing requirement.
2. December 23, 2024: The Fifth Circuit Court reinstated the filing requirement, and then FinCEN extended the deadline to January 13, 2025.
3. December 26, 2024: The Fifth Circuit vacated its earlier decision, making BOI filing non-mandatory during the injunction.

Currently, businesses are not required to file BOI reports until the legal injunction is resolved. However, voluntary filings are still accepted by FinCEN, allowing businesses to avoid potential last-minute compliance hurdles.

Challenges Beyond the Courts

The CTA faces more than just legal disputes. Only about 9 million of the estimated 32.6 million affected businesses have filed their BOI reports, highlighting widespread confusion. Additionally, legislative efforts to extend deadlines or repeal the law are gaining traction.

The evolving political landscape adds to the uncertainty. A new presidential administration may prioritize rolling back the CTA or reducing its enforcement.

What Should You Advise Clients to Do?

For businesses that have already filed BOI reports:

• Stay vigilant about changes to ownership or control, which require updates.

For businesses that haven’t filed:

• Filing now may eliminate future uncertainty and ensure compliance if deadlines are reinstated.
• For those who prefer to wait, gathering necessary information (ownership percentages, identifying documents, etc.) ensures readiness for quick action if required.

The key takeaway? Staying informed and prepared is critical. As we’ve seen with recent rulings, businesses may have little time to act once a new deadline is established.

Final Thoughts

The Corporate Transparency Act has created significant compliance challenges, but it also underscores the importance of staying proactive. This is an opportunity for finance professionals to guide clients through uncertainty, ensuring they meet their obligations without unnecessary stress.

As the situation gets closer, your expertise can be the difference between last-minute scrambling and seamless compliance. Encourage clients to stay informed, and consider advising voluntary filings to sidestep future complications.