FinCEN: Companies can voluntarily file BOI reports during injunction

Reporting companies may continue to voluntarily file beneficial ownership information (BOI) reports while the Corporate Transparency Act (CTA), P.L. 116-283, is on hold, the Financial Crimes Enforcement Network (FinCEN) said in an alert this week.

The alert followed a district court order last week that placed a preliminary injunction on enforcement of the CTA and its requirement for BOI reporting.

FinCEN said that while the preliminary injunction remains in effect, “reporting companies are not currently required to file their beneficial ownership information with FinCEN and will not be subject to liability if they fail to do so while the preliminary injunction remains in effect. Nevertheless, reporting companies may continue to voluntarily submit beneficial ownership information reports.”

In the courts

In the order issued last week by the U.S. District Court for the Eastern District of Texas in Texas Top Cop Shop, Inc. vs. Garland, No. 4:24-CV-478 (E.D. Tex. 12/3/24), the court found that the CTA likely is unconstitutional.

Under the injunction, the CTA and the BOI reporting rule cannot be enforced, and reporting companies need not comply with the CTA’s Jan. 1, 2025, BOI reporting deadline pending a further order of the court.

The Justice Department (DOJ) filed a notice of appeal on Dec. 5.

Previously, the DOJ appealed to the Eleventh Circuit a decision of an Alabama district court that the CTA is unconstitutional. In that case, however, the court said the order applied only to the plaintiffs named in the case. The Eleventh Circuit heard oral arguments in the case in September.

In its alert, FinCEN notes that the Texas case is just one of several pending cases where plaintiffs have challenged the CTA. District courts in Virginia, in Community Associations Institute v. Yellen, No. 1:24-cv-1597 (E.D. Va. 9/10/24), and in Oregon, in Firestone v. Yellen, No. 3:2024cv01034 (D. Ore. 9/20/24), have denied requests to enjoin the CTA, finding that the plaintiffs were unlikely to succeed with their constitutional arguments, FinCEN said.

According to the alert, consistent with the conclusions of those district courts, the government continues to believe that the CTA is constitutional.

Background

Under the CTA, which Congress passed in 2021 as an anti-money-laundering initiative, reporting companies 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, limited liability company, or other similar entity.

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.

AICPA advocacy

The AICPA has urged CPAs assisting clients with BOI reporting to be prepared.

According to an AICPA statement: “Best practices dictate that at a minimum those assisting clients with BOI report filings gather the required information from the clients and are prepared to file the BOI report if the injunction is lifted. While it is unlikely that the injunction will be lifted prior to the final outcome of the proceedings, we advise being prepared in the event that there is a reversal.”

The AICPA has created a BOI reporting resource center.

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