As the new year approaches, small business entities were gearing up to comply with the Beneficial Ownership Information (“BOI”) reporting requirements mandated by the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN). However, a recent federal court decision has altered this landscape. On December 5, 2024, a federal district court in Texas issued a ruling in Texas Top Cop Shop, Inc., et al. v. Merrick Garland, Attorney General of the United States, et al. The court found that the Corporate Transparency Act (CTA), which underpins the BOI Reporting Rule, is “likely unconstitutional.” As a result, the court granted the Plaintiffs’ Motion for Preliminary Injunction, effectively suspending the January 1, 2025, compliance deadline indefinitely.
Despite this suspension, businesses should remain vigilant. The enforceability of the BOI Reporting Rule remains uncertain, and covered entities would be wise to keep their Beneficial Ownership Information ready for submission in the event of a change in the legal landscape. Previously, the BOI Reporting Rule required reporting companies to submit specific information about their organization and key individuals. This included the company’s name, trade name (if any), address, and jurisdiction of formation. Additionally, it required the full legal name, date of birth, address, and a unique identifying number with issuing jurisdiction (e.g., from a U.S. passport or driver’s license) for beneficial owners and company applicants.
Timeliness in reporting was emphasized, with differing deadlines based on the company’s creation or registration date. Updates were also required within 30 days of any change in the reported information. While the court’s decision creates uncertainty, businesses that fall under the reporting requirements — such as domestic and foreign reporting companies — should stay informed. Domestic reporting companies include corporations, LLCs, and other entities created by filing a document with a secretary of state, while foreign reporting companies are those organized under foreign laws and registered to do business in the U.S.
It’s also important to note the exemptions under the BOI Reporting Rule. There are 23 categories of exempt entities, including tax-exempt organizations, banks, credit unions, accounting firms, and public utilities, among others. For businesses seeking clarity on the implications of this ruling or guidance on maintaining compliance, we encourage you to reach out to Michael Airdo at mairdo@airdowerwas.com or Matthew Lehmann at mlehmann@airdowerwas.com.