- FinCEN has provided ample resources to understand and comply with BOI reporting requirements.
- Initial reporting is due by January 1, 2025 for entities that were in existence as of January 1, 2024.
- Challenges to the law are still making their way through the courts.
Background
On January 1, 2024, the Beneficial Ownership Information (BOI) reporting rules took effect under Section 6403 of the Corporate Transparency Act (CTA). The act tasked the U.S. Department of the Treasury to collect information identifying individuals who directly or indirectly own or otherwise control certain entities. The database is intended to assist the Financial Crimes Enforcement Network (FinCEN) and other permitted agencies to protect U.S. financial interests from illicit activity hidden behind shell companies or other complex ownership structures.
Insight from Forvis Mazars: While Treasury is tasked with compiling this information, this is not considered a tax compliance related requirement under the Internal Revenue Code; rather, it is a legal requirement. FinCEN expects reporting companies will be able to file the reports on their own using the guidance they have provided (see below for more). We recommend that reporting companies reach out to their legal counsel if additional assistance is needed.
Resources Are Available
FinCEN’s dedicated webpage to the BOI reporting requirements provides several resources to help reporting companies understand and comply with the requirements. Resources include a reference guide, FAQs, videos, and a link to the e-filing system. While many reporting companies do have filing obligations, there is a defined list of exemptions that may apply. Those that willfully disregard the reporting requirements can face civil and criminal penalties, including imprisonment and fines.
Reporting Timeline
It is important to understand the timeline of when reports are due as initial BOI reports may already be due or are coming due soon.
- Reporting companies created or registered to do business before January 1, 2024 must file reports by January 1, 2025.
- Reporting companies created or registered to do business on or after January 1, 2024 and before January 1, 2025 must file reports within 90 calendar days after receiving notice that the reporting company’s creation or registration is effective.
- Reporting companies created or registered to do business on or after January 1, 2025 must file reports within 30 calendar days after receiving notice that the reporting company’s creation or registration is effective.
- While the BOI report is not an annual filing, if a change to required information occurs, e.g., an update to the entity’s DBA or even a driver’s license number of a beneficial owner, an updated report is due within 30 calendar days after the change occurs.
FinCEN has provided notices of relief to victims of Hurricanes Milton, Helene, Debby, Beryl, and Francine. Reporting companies have been given an additional six months to submit BOI reports if the reporting company has an original reporting deadline beginning one day before the disaster began and ending 90 days after, and if the principal place of business is located in specified areas designated by FEMA and the IRS. Reporting companies with a principal place of business outside the designated areas but that have records inside of them, which are necessary to fulfill their BOI filing requirements, should contact FinCEN through its webpage for assistance.
Legal Challenges
In March 2024, a federal district court held the CTA unconstitutional and prohibited its enforcement against the plaintiffs in the case of National Small Business United v. Yellen. The U.S. Department of Justice has appealed the ruling and FinCEN issued a notice stating that while the plaintiffs were not required to provide BOI reports, the organization would still enforce the provisions of the act for others.
More recently, federal district courts have denied motions for preliminary injunction relief from the CTA in Firestone v. Yellen and Community Associations Institute v. Yellen. Both courts found that the plaintiffs failed to demonstrate a likelihood of success on the merits, irreparable injury, or hardship as required to receive an injunction.
Insight from Forvis Mazars: The aforementioned legal challenges, if all ultimately appealed, would occur in different appellate circuits—including the Fourth, Ninth, and Eleventh—potentially setting up different rulings among them and motivating the U.S. Supreme Court to make a final decision on the act’s constitutionality.
How Forvis Mazars Can Help
As previously mentioned, given the BOI reporting rules are not part of the Internal Revenue Code and more of a legal matter, we recommend reporting companies contact legal counsel for assistance. However, professionals at Forvis Mazars are available to assist with general questions concerning the requirements and can help direct you to available resources. Please contact us if we can be of additional help.
For more information on the legislation enacting these requirements and their details, please see the links below to our previously published FORsights™.