AICPA: BOI ruling confuses businesses; enforcement should be delayed

The AICPA and over 50 state CPA societies have written to the Treasury secretary and the director of the Financial Crimes Enforcement Network (FinCEN) asking that enforcement of beneficial ownership information (BOI) reporting requirements be suspended until one year after court cases have been resolved.

“We are still concerned that small businesses will be caught off guard with the new filing requirement and failure to file could result in steep civil and criminal penalties,” said the letter, dated April 3, and sent to Treasury Secretary Janet Yellen and FinCEN Director Andrea Gacki. “The recent NSBA v. Yellen court case which found the Corporate Transparency Act (CTA) to be unconstitutional has only compounded confusion, with most entities believing they no longer have a filing requirement.

“Based on these strong concerns, we ask that you suspend all enforcement actions until one year after the conclusion of all court cases related to NSBA v. Yellen, and further believe that FinCEN should take no retroactive enforcement for noncompliance during this time,” the letter said.

Sue Coffey, CPA, CGMA, AICPA & CIMA’s CEO–Public Accounting, signed the letter, along with 54 state CPA societies.

The letter referred to National Small Business United v. Yellen, No. 5:22-cv-1448-LCB (N.D. Ala. 3/1/24), in which a district court in Alabama granted the plaintiffs’ motion for summary judgment. The DOJ quickly filed its appeal, and FinCEN issued a notice announcing that it will not enforce the BOI requirements against the plaintiffs — the National Small Business Association (NSBA) and its 65,000 members and an Alabama businessman.

Other lawsuits have been filed, including one by the Small Business Association of Michigan, which has 32,000 members.

Under the CTA, which Congress passed in 2021 as an anti-money-laundering initiative, reporting companies, defined as corporations, limited liability companies (LLCs), and similar entities, must disclose the identity and information about beneficial owners of the entities. For new entities incorporated after Jan. 1, 2024, reporting companies must also disclose the identity of “applicants” — defined as any individual who files an application to form a corporation, LLC, or other similar entity.

Reporting companies are required to provide information about both the companies and their beneficial owners and applicants, including full legal name, address, state or tribal jurisdiction of formation, IRS taxpayer identification number, birth date, and other details. Willful violations are punishable by a fine of $591 a day, up to $10,000, and two years in prison with similarly serious penalties for unauthorized disclosure.

FinCEN, which administers the CTA, estimates that BOI reporting regulations apply to 32.6 million entities with 5 million added each year through 2034.

The AICPA has previously written letters to FinCEN and Congress voicing its concerns about the constricted timeline for small businesses to comply with BOI reporting regulations.

“We have outlined these concerns to Congress at various times throughout the rulemaking process as well and will continue to do so,” the most recent AICPA letter said. “We will also continue to ask for a legislative delay should FinCEN continue enforcement activities while confusion remains within the small business community and for those financial professionals working to support their small business clients.”

— To comment on this article or to suggest an idea for another article, contact Martha Waggoner at Martha.Waggoner@aicpa-cima.com.