Beneficial Ownership Reporting Requirements

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ACECBIT - Business Ownership Information Reporting

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As of 12/26/2024: Katharine Mottley from ACEC National informed us that the Fifth Circuit has reinstated the nationwide injunction against the reporting requirement. For now, firms do not have to file the beneficial ownership reports.

The legal challenges continue and in January 2025, we expect the Department of Justice to ask the Supreme Court to intervene. If the Supreme Court does not intervene then the injunction will stay in place until at least the end of March. 

Following the Fifth Circuit’s December 26 decision, the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN) issued an alert on December 27, 2024, titled “Impact of Ongoing Litigation – Deadline Stay – Voluntary Submission Only.” The alert states that, while the injunction is in place, reporting companies are not required to file beneficial ownership information with FinCEN and are not subject to liability under the CTA for failing to file beneficial ownership information. FinCEN also noted that reporting companies may continue to voluntarily submit beneficial ownership information reports if they so choose.

The Fifth Circuit’s December 26 decision did not provide a detailed analysis of the court’s reasoning for overriding the Fifth Circuit panel but stated that restoring the injunction would “preserve the constitutional status quo” while the appeal on the merits proceeds. 

The Fifth Circuit has scheduled oral arguments regarding the injunction for March 25, 2025. Companies should maintain any beneficial ownership information that has been gathered for CTA reporting purposes in case filing requirements are reinstated and/or revised. 

ACEC will continue to keep us informed of the ever-changing status of the beneficial ownership reporting requirements. 

As of 12/23/24: Katharine Mottley from ACEC National informed us that the Fifth Circuit Court of Appeals granted the government’s motion to stay the injunction on beneficial ownership filings. That means that these firms must file their BOI reports with FinCEN:

Firms with 20 or fewer employees and firms with less than $5 million in gross receipts must file BOI reports with FinCEN.

Larger firms may also be required to file BOI reports, depending on their structure. For example, some large firms have holding companies that do not house any employees and that type of entity could fall under the CTA.

There will be continued legal action and further appeals, but at the moment the December 31, 2024 deadline is back in place.

As of 12/16/24: The U.S. District Court for the Eastern District of Texas issued a nationwide preliminary injunction temporarily suspending enforcement of the beneficial ownership reporting requirements. This decision pauses the January 1, 2025, deadline for filing BOI reports – unless overturned or modified by the courts. Member firms that have not yet filed should continue preparing by gathering the necessary information to comply, in consultation with their legal counsel. Last week, the Department of Justice, on behalf of the Financial Crimes Enforcement Network (FinCEN), filed motions requesting a stay or modification of the injunction. The government requested a ruling from the Fifth Circuit Court of Appeals no later than December 27, 2024. The Fifth Circuit set a briefing schedule calling for a response from the plaintiffs by December 17 and a reply from the government by December 19. If the injunction is lifted or the Firth Circuit grants a stay, businesses will still need to file by the January 1, 2025, deadline. FinCEN could choose to voluntarily delay the reporting deadline but so far has not done so.

CTA Paused for Now (News from several sources on 12/3/2024): In a pivotal decision issued December 3, 2024, the United States District Court for the Eastern District of Texas has effectively halted the enforcement of the Corporate Transparency Act (CTA) across the nation. Judge Amos Mazzant, III granted an injunction in Texas Top Cop Shop, Inc., et. al., v. Merrick Garland, ruling that Congress exceeded its constitutional authority in enacting the law.

This ruling comes at a critical moment, less than a month before millions of businesses were required to comply with the CTA's January 1, 2025 reporting deadline. The decision marks the second significant legal challenge to the CTA this year, following a similar ruling in Alabama last March that had limited impact as it only applied to the specific plaintiffs in that case.

The CTA, which took effect in January 2024, required most businesses formed under state law to report Beneficial Ownership Information (BOI) to the Financial Crimes Enforcement Network (FinCEN). This information would have included details about individuals who own 25% or more of a business or exercise significant control over it.

Judge Mazzant's ruling centered on the constitutional limits of congressional power, specifically finding that the CTA falls outside Congress's authority to regulate interstate and foreign commerce. The injunction effectively suspends the requirement for businesses to file beneficial ownership reports by the approaching deadline.

While this ruling provides temporary relief for businesses, legal experts anticipate the Department of Justice will swiftly appeal the decision. The situation creates uncertainty for businesses nationwide, who must now wait to see whether higher courts will uphold or overturn this injunction.

But for now, businesses are not required to comply with the CTA's reporting requirements, although many advisors suggest maintaining readiness for potential reporting obligations pending the outcome of likely appeals.

News from Katharine Mottley at ACEC National on 11/5/2024:  The CTA was designed to disrupt money laundering and terrorist financing and it requires certain businesses to file Beneficial Ownership Information reports with the Financial Crimes Enforcement Network (FinCEN) at Treasury. BOI reports must be filed by existing firms by December 31, 2024.

Firms with 20 or fewer employees and firms with less than $5 million in gross receipts must file BOI reports with FinCEN.

Larger firms may also be required to file BOI reports, depending on their structure. For example, some large firms have holding companies that do not house any employees and that type of entity could fall under the CTA.

ACEC is continuing to work with the Main Street Employers coalition to delay implementation of the CTA until FinCEN does more to communicate these requirements to affected businesses, but in the meantime Katharine wanted to be sure that ACEC members have this information.