Williams | Robinson | Wiggins

What the "Corporate Transparency Act" means to you

Until recently, responsibility for reporting most business ownership information to the federal government fell upon financial institutions. Effective January 1, 2024, this obligation now rests also with busines owners themselves. Pursuant to the Corporatate Transparency Act of 2019 (the "Act"), business owners must report information to the Financial Crimes Enforcement Network ("FinCEN") of the U.S. Treasury Department. However, the Act has been challenged in court, and now a nationwide injunction prohibiting its enforecement is in effect. Keep reading, below, to learn more about your obligations as a business owner.

What is BOI? Beneficial ownership information ("BOI") consists of disclosures about ownership that most business owners are required to file with FinCEN under the Act. The information collected is intended to help prevent money laundering, fraud, terrorist activities, and other criminal undertakings.

Has the CTA been challenged in court? Yes, several lawsuuits are winding their way through the courts challenging enforcement of the CTA. In early December (2024), U.S. District Court Judge Amos L. Mazzant preliminarily enjoined the CTA and its implementing regulations. Texas Top Cop Shop, Inc. v. Garland, 2024 WL 4953814 (Dec. 03, 2024). Two days later the Department of Justice filed an appeal with the 5th Circuit Court of Appeals on behalf of the Department of Treasury.

Appeallate court lifts injunction. On Decmber 23, 2024, the 5th Circuit Court of Appeals lifted the injunction previously issued by the lower court. The the court said in its order that "the government has made a strong showing that it is likely to succeed on the merits in defending CTA's constitutionality.""

Appeallate court reinstates injunction. In a dizzying turn of events, on Decmber 26, 2024, the 5th Circuit Court of Appeals reinstated the injunction previously issued by the lower court. In its superceding order, the court stated:

However, in order to preserve the constitutional status quo while the merits panel considers the parties' weighty substantive arguments, that part of the motions-panel order granting the Government's motion to stay the district court's preliminary injunction enjoining enforcement of the CTA and the Reporting Rule is VACATED.

Now that the injunction is back in effect, who needs to file and when? In light of the 5th Circuit's reinstatement of the nationwide injunction, FinCEN issued the following alert on its information page:

In light of a recent federal court order, reporting companies are not currently required to file beneficial ownership information with FinCEN and are not subject to liability if they fail to do so while the order remains in force. However, reporting companies may continue to voluntarily submit beneficial ownership information reports.

Should I file voluntarily? FinCEN will continue to accept voluntary filings of BOI, but it is not required at this time. If the ongoing litigation is resolved in the Government's favor, FinCEN will allow ample time for non-filers to submit their reports without liability. If you intend to file voluntarily, continue to read below.

What needs to be filed? The BOI report itself is reasonably simple. It includes information about the company's beneficial owners, such as full legal names, dates of birth, addresses, and a unique identifier like driver's license or passport number. The report also includes details about the company, such as its name, address, and jurisdiction of formation.

What to include? If you intend to file your ownership information while challenges proceed through the courts, the BOI report includes information about the company's beneficial owners, such as their full legal name, date of birth, address, and a unique identifier like a driver's license or passport number. The report also includes details about the company, such as its name, address, and jurisdiction of formation.

Where do I file? The BOI report is filed online with the Financial Crimes Enforcement Network (FinCEN) of the U.S. Treasury Department.

Are there penalties for not filing? If the ongoing litigation is resolved in the Government's favor, you will be required to file a BOI report with FinCEN. Failure to file a report on time or with accurate information can result in civil penalties of up to $591 per day, and criminal penalties in extreme cases. Criminal penalties include up to two years in prison and a fine of up to $10,000.

Is my information secure? The BOI information you submit is stored in a secure database and is not available to the general public. However, it can be accessed by law enforcement, certain government agencies, and financial institutions.

Are any organizations exempt from filing? There are several types of entities that are exempt from BOI reporting. They include:

• Large operating companies: Have at least 20 full-time employees, more than $5 million in gross receipts, and a physical office in the United States.
• Inactive entities: Established before January 1, 2020, and have not been active in business, had ownership changes, or received or sent more than $1,000 in the last year.
• Tax-exempt entities: Meet the requirements of Sections 501(a), 501(c), 527(a), 527(e)(1), and 4947(a) of the Internal Revenue Code.
• Entities assisting tax-exempt entities: Provide financial assistance or governance rights to a tax-exempt entity, and are beneficially owned or controlled by US citizens or permanent residents.
• Securities reporting issuers: Registered under the Securities Exchange Act.
• Banks, credit unions, and depository institution holding companies: Meet federal banking and credit union definitions.
• State-licensed insurance producers: Authorized by a state and have a physical office in the United States.

Other exempt entities include: • Money transmitter businesses • Securities exchanges and clearing agencies • Investment companies and advisers • Venture capital fund advisers • Public accounting firms • Public utilities • Financial market utilities • Pooled investment vehicles • Government authorities

If a reporting company no longer meets the criteria for an exemption, it must file an updated BOI report within 30 days.

Did you know? The above information is presented by Williams | Robinson | Wiggins as a public service and to generally outline the law in a particular area. It is not provided and is not intended as legal advice tailored to you or to your unique situation. Every legal matter depends upon specific facts which an attorney hired by you must consider in forming legal opinions and advice.

Need more information? If you need to file a BOI report, you may contact us at(573) 341-2266 to obtain more detailed assistance.