Court Battles Rage: File Your FinCEN BOI Report Now or Wait?
A bumpy road has put the CTA on hold. We’ll get to that shortly. But first, a little background.
The Corporate Transparency Act (CTA) took effect one year ago, on January 1, 2024.
Background on the CTA
The CTA requires most smaller corporations and limited liability companies (LLCs), and some other business entities, to file a beneficial ownership information (BOI) report with the U.S. Department of the Treasury Financial Crimes Enforcement Network (FinCEN).
The BOI report identifies and provides contact information for the human beings who own or control the entity. This information is not made public—it is to be used only by law enforcement to combat money laundering, drug trafficking, and other illegal activities.
The original deadline for filing BOI reports for businesses in existence before 2024 was January 1, 2025—the date of this article’s publication.
Businesses formed during 2024 had 90 days after formation to file.
Filing is free online at FinCEN’s BOI reporting website.
Penalties Are Big
Willful violations of the CTA are punishable by a civil fine of $591 a day, up to $10,000 in criminal penalties, and up to two years in prison.
How Is It Going?
BOI Report Not Required . . . Required . . . Not Required
On December 3, 2024, a Texas federal district court ruled that if you did not file your FinCEN BOI report during the court’s injunction, you could not be penalized by FinCEN. (This indefinitely delayed the January 1, 2025, filing deadline and all other deadlines.)
How has this massive new filing requirement been going? Not very well. As of early December 2024, only about 9 million of the estimated 32.6 million businesses subject to the CTA (termed “reporting companies”) had filed their BOI reports.
On December 23, 2024, the Fifth Circuit Court of Appeals ruled to overturn the Texas injunction and immediately reinstate the FinCEN BOI filing requirements. (This reinstated the January 1, 2025, and all other deadlines.)
Later that same day, FinCEN extended the January 1, 2025, filing date to January 13, 2025, and extended all other deadlines for a short time.
On December 26, 2024, the Fifth Circuit vacated its stay on the Texas court’s injunction. (This means you cannot be penalized during the injunction period for not filing your BOI reports.)
Effect on Filing Reports
Reporting companies are not currently required to file beneficial ownership information with FinCEN and are not subject to penalties for not filing while the injunction remains in force.
The injunction applies to
reporting companies that existed on January 1, 2024, and had a reporting date of January 1, 2025;
new reporting companies formed in 2024 that had an upcoming 90-day deadline to file their BOI reports;
companies that filed and had a reportable change that required a revised report within 30 days; and
reporting companies that will be formed in 2025 and would have had a 30-day reporting deadline.
FinCEN has posted an alert on its website that BOI filings are not required while the injunction remains in effect, but you can file voluntarily.9
Other Litigation Challenging the CTA
The Texas case is only one of 13 lawsuits filed against the CTA in federal district courts around the country. The courts that have thus far issued rulings have split on whether the law is constitutional.
One district court in Alabama already held that the CTA is unconstitutional but declined to issue a nationwide injunction preventing FinCEN from enforcing it against all reporting entities and humans other than the plaintiffs in the case.
The case has been appealed to the Fifth Circuit Court of Appeals by FinCEN, and a decision might come down soon. Oral arguments were held in the case in September, and many observers had the impression that the court was inclined to rule in FinCEN’s favor—that is, that the CTA was constitutional.
Unlike the Texas and Alabama cases, federal district courts in Oregon, Michigan, and Virginia have all declined to issue preliminary injunctions to halt enforcement of the CTA, ruling that in their opinion the law is likely constitutional. These cases are also being appealed.
Ultimately, the U.S. Supreme Court may have to decide whether the CTA is constitutional—and it could be some time before this happens.
Other Threats to the CTA
The legal cases are not the only challenges to the CTA.
Even before the Texas district court issued its order enjoining the CTA, there were calls to extend the filing deadline by one year, given that the majority of the 32.6 million reporting companies have not filed BOI reports. The demand for delay will likely grow due to the widespread confusion caused by the Texas district court’s injunction.
Also, bills have been introduced in Congress to repeal the CTA. Thus far, they have gone nowhere, but this could change with the new Congress in 2025.
Finally, it is unclear what the new Trump administration will do when it takes office in 2025. The CTA was passed in 2020 with strong bipartisan support in Congress, even overriding President Trump’s veto.
Given Trump’s strong anti-regulatory bias, the second Trump administration could attempt to derail the law—for example, it could
direct FinCEN to delay the existing January 1, 2025, filing deadline or make other changes in its regulations (this would require notice-and-comment rulemaking under the Administrative Procedure Act),
direct the Department of Justice not to defend the CTA in court,
cut the funding for FinCEN to enforce the CTA, or
work with Congress to eliminate the CTA or limit its scope.
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.
If you haven’t yet filed your BOI report, you can do so even while the injunction is in effect. 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 so you know if and when the courts rule that you need to file. Thinking about it in this way, you might find it easier to file so you don’t have to pay attention or worry.
Takeaways
The CTA requires most smaller corporations and LLCs to file a BOI report with FinCEN. The filing deadline for companies in existence before 2024 was originally today, January 1, 2025.
But a Texas court issued a preliminary injunction barring FinCEN from enforcing the CTA nationwide, and that injunction remains in effect today, January 1, 2025. While the injunction is in place, you face no penalties for not filing your BOI or other FinCEN reports by today.
But as we saw in December 2024, the Fifth Circuit could lift the injunction anytime.
While the injunction is in effect, the FinCEN website accepts BOI filings. So you can file BOI reports voluntarily and avoid uncertainty.