Current Status of Beneficial Ownership Information Reporting: Enforcement Suspended.

As of publication of this article FinCEN has stated that it will not issue fines or penalties, or take any other enforcement actions by the currently set March 21, 2025 Beneficial Ownership Information (“BOI”) reporting deadline. No later than March 21, 2025 FinCEN intends to issue a rule to extend reporting deadlines. The United States Department of the Treasury, in a March 2, 2025 press release, provided further guidance, stating that after the upcoming FinCEN rule changes the Department will “not enforce any penalties or fines against U.S. citizens or domestic reporting companies” and will “further be issuing a proposed rulemaking that will narrow the scope of the rule to foreign reporting companies only.” Although the law that created the BOI reporting requirement remains in place, enforcement of the law is suspended and undergoing revision.

If you have been following the developments of BOI reporting, by now you are well aware it is vital you check the date of this article to ensure it is current. The reporting requirements have been hotly contested and have oscillated between on and off at a dizzying pace. While current political sentiment is trending away from enforcement of BOI reporting, if the past few months have demonstrated anything, it is that another abrupt reversal is not out of the question. This article touches on BOI reporting’s legal requirements and outlines its recent history and ongoing court battles.

BOI reporting is a piece of the Corporate Transparency Act (“CTA”), which in itself is a piece of the United States National Defense Authorization Act for Fiscal Year 2021. One of the goals of the CTA is to combat money laundering, particularly through anonymous shell corporations. To achieve this goal, the CTA requires smaller companies throughout the United States to report the individual persons who benefit from the activities of the company, whether the persons own or lead the company. The last day to report was originally December 31, 2024.

The people required to report for their companies are dubbed the “Beneficial Owner(s)” of the company. A Beneficial Owner is defined as “an individual who directly or indirectly: (1) exercises substantial control over the reporting company, or (2) owns or controls at least 25% of the reporting company’s ownership interests.” While this definition may seem straightforward, it has created a deluge of questions from small business owners and their accountants and attorneys which remain unanswered. E.g. what if a trust owns a company, and a beneficiary of that trust receives 75% of the profits from that company, does the beneficiary “indirectly own” more than 25% of the company?

BOI reporting is not only convoluted, but the reporting requirements raise privacy concerns. In order to achieve the goals of the legislation, that is, identify the actual individual who is behind a company that may be a vehicle for money laundering, BOI reporting requires that Beneficial Owners upload a picture of their passport or state driver’s license to a Financial Crimes Enforcement Network web portal. A passionate debate has ensued whether this disclosure of personal information is an unconstitutional government overreach, or a necessary piece of legislation to effectively combat criminal activity. Which explains why there are contentious court battles ongoing.

The initial lawsuit that stood at the forefront of this battle was Texas Top Cop Shop, Inc. v. Garland. The Plaintiffs argued that the CTA is unconstitutional “because: (1) it intrudes upon States’ rights under the Ninth and Tenth Amendments; (2) the CTA compels speech and burdens Plaintiffs’ right of association under the First Amendment; and (3) the CTA violates the Fourth Amendment by compelling disclosure of private information.”

With the original December 31, 2024 reporting deadline rapidly approaching, on December 3, 2024 the Texas Top Cop Shop, Inc. court ruled the Plaintiffs had satisfied the requirements for a preliminary injunction, and the court issued a nationwide preliminary injunction that paused BOI reporting. However, on December 23, 2024, the U.S. Court of Appeals for the Fifth Circuit agreed with a Government appeal and rejected the Texas Top Cop Shop, Inc. nationwide preliminary injunction, reinstating the reporting requirements. U.S. companies then had an extra two weeks to report, through January 12, 2023, leaving small business owners scrambling in the midst of the holidays. But on December 26, 2024 the Fifth Circuit decided to reinstate the pause on reporting.

The case went to the Supreme Court, retitled McHenry v. Texas Top Cop Shop, Inc. On January 23, 2025 the Supreme Court agreed with the Government’s appeal, reinstating reporting requirements. Interestingly, the Court’s decision wasn’t based on the merits of the initial constitutional questions raised, rather, it was a question of procedure. Can a district court issue a universal injunction that stops a federal law? The Court’s preliminary answer was no, but the actual determination remains undecided.

So the Government’s appeal won, which would indicate BOI reporting was reinstated. Not quite so. Another case, Smith v. U.S. Department of the Treasury remained. Smith acknowledged Garland v. Texas Top Cop Shop, and under similar principles had enacted an injunction of its own on January 7, 2025. “The Corporate Transparency Act is unprecedented in its breadth and expands federal power beyond constitutional limits. It mandates the disclosure of personal information from millions of private entities while intruding on an area of traditional state concern. [The Government’s] argument in defense of the statute, moreover, relies on the ‘effects upon interstate commerce so indirect and remote that to embrace them…would effectually obliterate the distinction between what is national and what is local and create a completely centralized government.’ [Citation omitted]”

Because of Smith, reporting requirements remained paused up until February 18, 2025. On February 18, 2025, yet another reversal of course occurred and the Smith court granted a motion to stay its preliminary relief that paused BOI reporting, effectively reinstating the reporting requirements. Shortly after, FinCEN issued a notice extending reporting deadlines by thirty days. With reporting reinstated, the deadline to file for “the vast majority” of companies became March 21, 2025.

Not even ten days later, on February 27, 2025, FinCEN decided not to enforce BOI reporting after all. FinCEN’s announcement stated it would not  “issue any fines or penalties or take any other enforcement actions against any companies based on any failure to file or update beneficial ownership information (BOI) reports.” FinCEN’s announcement was a sign of things to come, and on March 2, 2025 the U.S. Department of the Treasury issued a press release stating that it will not enforce penalties or fines associated with current BOI reporting deadlines, it will not enforce any penalties or fines against U.S. citizens or domestic reporting companies after the upcoming rule changes, and it will issue proposed rulemaking that revises BOI reporting to apply to foreign companies only.

The Treasury Department’s announcement appears to be an emphatic rejection of BOI reporting for domestic companies. For now. It remains to be seen what regulations the U.S. Treasury will propose, finalize, and enforce, as well as if Congress will take any action. The constitutional questions of BOI reporting, as well as the question posed by the Supreme Court regarding universal injunctive relief, remain as well. If anything, the multitude of frequent reversals of enforcement and changes to deadlines outlined above, and the legal questions raised by BOI reporting, illustrate the importance of continuing to closely follow the developments that are certain to come.