Janet Yellen, U.S. Treasury secretary, on a tour of the Financial Crimes Enforcement Network (FinCEN) in Vienna, Virginia, on Jan. 8, 2024.
Valerie Plesch/Bloomberg via Getty Images
An upcoming Treasury Department deadline for millions of small businesses to fulfill a new reporting requirement on “beneficial ownership information” was delayed again, following a court order that suspended enforcement.
The 5th U.S. Circuit Court of Appeals issued an order late on Dec. 26 that halted enforcement while the court “considers the parties’ weighty substantive arguments” on the constitutionality of the Corporate Transparency Act, which created the BOI reporting requirement, the order said.
The new deadline, which had been Jan. 13, is now unclear.
“While it is not known how long the injunction will remain in effect, the case is calendared for oral argument en banc on March 25, 2025, so we expect that the injunction will be effective at least through March,” Daniel Stipano, a partner at law firm Davis Polk & Wardwell, wrote in an email.
In the interim, businesses aren’t required to file BOI reports to the Financial Crimes Enforcement Network, known as FinCEN, which is part of the Treasury.
Businesses don’t face liability for the time being
Additionally, businesses aren’t subject to liability if they don’t file BOI reports while the order remains in force, FinCEN wrote Friday on its website.
Businesses and owners that didn’t comply with the reporting rules were potentially subject to civil penalties of up to $591 a day. They could also face up to $10,000 in criminal fines and up to two years in prison.
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The BOI report data helps the federal government identify people who directly or indirectly own or control a company, to prevent criminals from hiding illicit activity conducted through shell companies or opaque ownership structures, the Treasury said.
The rule applies to about 32.6 million businesses, including certain corporations, limited liability companies and others, according to federal estimates. Many are exempt from the requirement, such as businesses with more than $5 million in gross sales and more than 20 full-time employees.
“Reporting companies may continue to voluntarily submit beneficial ownership information reports,” according to FinCEN.
Whiplash for small businesses
The delay represents a bit of legal whiplash for small business owners.
On Dec. 3, a federal court in Texas temporarily blocked the Treasury from enforcing BOI reporting rules, which at that time were set to take effect Jan. 1, 2025.
Then, on Dec. 23, a motions panel of 5th Circuit lifted that enforcement injunction after an appeal from the federal government. On Dec. 26, a different panel of that same appeals court – the merits panel – put the injunction back into place.
“The bottom line is that no one needs to file a BOI Report – unless and until the injunction is lifted,” Stipano explained in an email.