BY JUSTIN SMITH
FOR THE OBSERVER
LEE COUNTY — A federal court in Texas recently held the Corporate Transparency Act (CTA) is unconstitutional and imposed a nationwide injunction against the CTA’s enforcement of the Beneficial Ownership Information (BOI) reporting. The U.S. Treasury Department has promised to appeal but will suspend enforcement and penalties while the injunction is in place.
With year-end rapidly approaching, much controversy has arisen over the CTA’s requirements for small businesses to file their Beneficial Ownership Information (BOI) report with the U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN) by Dec. 31. The CTA mandates that nearly all companies identify and report individuals who have direct or indirect ownership in a company (referred to as Beneficial Ownership).
The goal of the rule is to help reduce money laundering and tax fraud, but with little advertising or awareness campaigns, the 32.5-plus million estimated businesses that are subject to it may not even know about it.
Nearly every business in the United States that is a legal entity (such as a LLC, Partnership or Corporation) is required to file this report. If you are a small business owner and have any kind of legal entity, this rule applies to you.
Business owners with a filing obligation must provide their name, date of birth, addressand a scan of their government-issued photo ID to FinCEN as part of their reporting obligations. Any time this information changes, updated information must be submitted to FinCEN’s database within 30 days.
Failure to file with FinCEN could lead to a criminal penalty of up to two years of jail time and civil fines of up to $10,000 per violation.
Business entities that were in existence as of Dec. 31, 2023, have until Jan. 1, 2025, to submit their report. Entities created during 2024 will have 90 days to submit their reportand entities created in 2025 and after will only receive 30 days to report. Businesses that dissolved in 2024 are also required to file.
As of December 2024, FinCEN estimates that approximately six million businesses have filed a report. While the filing itself is simple and straightforward, the likelihood is that millions of businesses will not have completed their filing before year-end. Attorneys and accountants are wary of providing filing services to their clients because of the associated liability. The American Institute of CPAs (AICPA) has lobbied Congress to extend or repeal the law, even as the court system continues to review the law. It is unknown if the incoming Trump administration will drop the appeal and effectively allow the law to be overturned judicially, or if the incoming Congress will make changes to the law.
Visit www.fincen.gov/boi for more information, including guidance for small businesses and a small business compliance toolkit.
Justin Smith is a licensed Certified Public Accountant in Opelika, specializing in individual and small business tax and accounting. He can be contacted at 334-400-9234 or Justin@JSmithCPA.net. His website is www.jsmithcpa.net.
