Yesterday, the Financial Crimes Enforcement Network (FinCEN) issued an updated notice stating that the Beneficial Ownership Information Reporting Requirements (BOI Reporting Rule) under the federal Corporate Transparency Act (CTA) are once again in effect after the U.S. District Court for the Eastern District of Texas stayed (i.e., lifted) an injunction against the BOI Reporting Rule in the case of Smith et al. v. U.S. Department of the Treasury et al. on February 17, 2025. On Wednesday, February 19, FinCEN announced that BOI Reporting Rules are once again in effect, but that it would extend the BOI Reporting Rule deadline for the vast majority of companies to March 21, 2025. Accordingly, business entities that have not already done so will need to take action to determine if they are “reporting companies” and gather all information needed for reporting.
Important Developments in the Courts
As discussed in our previous Client Alert on January 24, 2025, the United States Supreme Court issued a ruling on January 23, 2025 (McHenry et al. v. Texas Top Cop Shop, Inc. et al.) staying (i.e., lifting) an injunction by the U.S. District Court for the Eastern District of Texas (Texas Top Cop Shop, Inc. et al. v. McHenry et al.) against enforcement of the BOI Reporting Rule under the CTA. Despite the Supreme Court’s ruling with respect to the Texas Top Cop Shop case, the injunction against enforcement of the CTA and the BOI Reporting Rule issued in the Smith case remained in place, and FinCEN issued an alert noting that reporting companies were not at that time required to file BOI reports or subject to penalties for failure to do so (see Alert: Ongoing Litigation – Texas Top Cop Shop, Inc., et al. v. McHenry, et al., No. 4:24-cv-00478 (E.D. Tex.) & Voluntary Submissions [Updated January 24, 2025], at https://www.fincen.gov/boi).
On February 5, 2025, the Department of the Justice (on behalf of the Department of Treasury) appealed the U.S. District Court’s order in Smith to the Fifth Circuit Court of Appeals and moved the U.S. District Court to stay such order pending the appeal. On February 17, 2025, the U.S. District Court for the Eastern District of Texas issued an order providing that, in light of the Supreme Court’s order with regard to the Texas Top Cop Shop case, the U.S. District Court would grant the Department of Treasury’s motion to stay the U.S. District Court’s injunction against enforcement of the CTA and the BOI Reporting Rule in Smith.
As of Today
On February 19, 2025, FinCEN issued an updated notice stating that the BOI Reporting Rule is back in effect (see Alert: Ongoing Litigation – Smith, et al. v. U.S. Department of the Treasury, et al., 6:24-cv-00336 (E.D. Tex.): Corporate Transparency Act reporting requirements back in effect [Updated February 19, 2025], at https://www.fincen.gov/boi), although FinCEN is “generally extending the deadline 30 calendar days from February 19, 2025, for most [the vast majority of] companies.” The notice further provides that “FinCEN will provide an update before [March 21, 2025] of any further modification of this deadline, recognizing that reporting companies may need additional time to comply with their BOI reporting obligations once this update is provided.” FinCEN noted there will be exceptions for (1) “[r]eporting companies that were previously given a reporting deadline later than the March 21, 2025 deadline,” such as those that qualify for certain disaster relief extensions, and (2) plaintiffs in National Small Business United v. Yellen, including members of the National Small Business Association (as of March 1, 2024).
What May Happen Next
FinCEN has extended reporting deadlines for the BOI Reporting Rule by thirty days from February 19, 2025 (i.e., March 21, 2025) and stated that during this 30-day period, it will “assess its options to further modify deadlines, while prioritizing reporting for those entities that pose the most significant national security risks.” FinCEN also stated that it “intends to initiate a process this year to revise the BOI reporting rule to reduce burden for lower-risk entities, including many U.S. small businesses.” However, no formal modifications to the BOI Reporting Rule have currently been announced outside of the extension of reporting deadlines for most companies until March 21, 2025, and we recommend that all business entities prepare to meet the March 21, 2025 deadline unless and until any modifications to the BOI Reporting Rule have been formally announced.
Litigation over the constitutionality of the CTA and BOI Reporting Rule is expected to continue in the Texas Top Cop Shop and Smith cases in the Eastern District of Texas and on appeal to the Fifth Circuit, and in other federal courts across the country. If the Fifth Circuit or any other federal District Court or Court of Appeals rules the CTA or BOI Reporting Rule unconstitutional or unenforceable, it is not clear whether or not the Justice Department under the new Trump Administration will appeal such a ruling to the Supreme Court. It is also not yet clear what changes the new Administration may make to enforcement of the CTA and the BOI Reporting Rule while they are in effect.
Further, legislation that could impact the timing and implementation of the CTA and BOI Reporting Rule has been introduced in Congress. On February 10, 2025, the U.S. House of Representatives unanimously passed a bill that would extend the deadline for reporting companies formed or registered before January 1, 2024 to submit beneficial ownership information to FinCEN until January 1, 2026. That bill’s chances of passage in the Senate, and of being signed by President Trump, are unclear at this stage. Additionally, on January 15, 2025, related bills were introduced in the U.S. House of Representatives and the U.S. Senate which would repeal the CTA. Those bills’ chances of passage in Congress, and of being signed by President Trump, remain unclear at this time.
What You Should Do Now
In view of the Smith injunction being lifted and FinCEN making it clear that it will be enforcing the BOI Reporting Rule, business entities should take action as soon as possible to determine if they are “reporting companies” required to comply with the BOI Reporting Rule, to identify their “beneficial owners” and “company applicants”, gather all information needed for reporting, and to submit their initial BOI Reports. Failure to comply in a timely manner may result in substantial fines and, if the violation is willful, even imprisonment. Additionally, new business entities formed after February 19, 2025 will need to take action within 30 days of formation to determine if they are “reporting companies” required to comply with the BOI Reporting Rule and submit their initial BOI Reports.
BLM&H has previously written an extensive summary of the BOI Reporting Rule, including on topics such as what companies are “reporting companies”, how to identify a reporting company’s “beneficial owners” and “company applicants”, and what information must be included in a BOI Report (“Corporate Transparency Act Beneficial Owner Information Reporting Requirements Take Effect on January 1, 2024 – What Business Entities Need to Know and Do” found at https://blmhlaw.com/corporate-transparency-act-beneficial-owner-information-reporting-requirements-take-effect-on-january-1-2024-what-business-entities-need-to-know-and-do/). If you are unfamiliar with the BOI Reporting Rule, we encourage you to read our summary.
How BLM&H Can Help You.
BLM&H will continue to monitor developments with respect to the CTA and the BOI Reporting Rule and the various cases challenging their enforceability and constitutionality.
BLM&H can help you understand and comply with the BOI Reporting Rule. If you have questions about the BOI Reporting Rule or the temporary injunction against its enforcement, or if you need help preparing for your company’s initial, updated or corrected filings should the injunction be lifted, please contact:
Kevin J. Loechl, kloechl@blmhlaw.com, 404.266.3205
Hunter Holliday, hholliday@blmhlaw.com, 404.266.3206
Quincy H. Jackson, qjackson@blmhlaw.com, 404.266.3212
Colton E. Francoeur, cfrancoeur@blmhlaw.com, 404.266.3217