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Injunction Bars Beneficial Ownership Information Report Requirement

By Madison Hess, J.D. | Reviewed by Joseph Fawbush, Esq. | Last updated on

An injunction has temporarily relieved businesses from having to file a Beneficial Ownership Information Report (BOIR). Companies are not penalized for not submitting their BOIR while this legal hold is in place. However, this situation might change if the legal conditions evolve. Business owners need to stay updated on new developments regarding this reporting requirement. Here’s what you need to know about the status of the required report and how to comply.

What Is the BOIR?

The BOIR is a report that businesses must file under the Corporate Transparency Act (CTA), which became effective in 2024. The report makes company ownership more visible to the U.S. government. It calls on companies to clarify who makes important decisions on their behalf.

The report aims to prevent illegal activities like money laundering and tax fraud. Right now, a court decision has paused the need to file these reports, but businesses can still choose to submit them.

The BOIR requirement applies to both U.S. and foreign companies. It applies broadly to corporations and limited liability companies (LLCs), but there are 23 exceptions, including sole proprietorships and tax-exempt entities like nonprofits. When the court's order is lifted, businesses will need to pay attention to any new filing deadlines.

On December 3, 2024, The U.S. District Court for the Eastern District of Texas issued an injunction barring enforcement of the CTA. This injunction (from Texas Top Cop Shop, Inc. v. McHenry – formerly Texas Top Cop Shop v. Garland) was a nationwide injunction.

On January 7th, 2024, in the case Smith v. U.S. Department of the Treasury, The U.S. District Court for the Northern District of Texas issued another injunction that enjoins enforcement of the CTA nationwide.

On January 23rd, the U.S. Supreme Court issued a stay on the December 3rd Injunction, but the January 7th Injunction is still in place. The U.S. Government has not yet contested this injunction but has time to do so if it chooses.

The issue being debated is whether Congress had constitutional authority to enact the CTA. The injunction was issued so that the CTA cannot be enforced while this issue remains unsettled.

During this period, companies are not required to file their BOI reports and are not subject to penalties for non-compliance. However, businesses can still choose to submit reports voluntarily if they wish.

The U.S. Department of Justice has not yet filed an appeal in the ongoing case, leaving the timeline for resolving these legal issues uncertain. Regardless, the government has voluntary decided not to enforce the BOIR filing requirement for another four years, independent of the current legal wrangling over its constitutionality.

How to File a BOIR

Large operating companies, small businesses, and similar entities need to know how to file their (BOI) reports. If and when the current legal injunction is lifted, companies must meet the beneficial ownership information reporting requirements. Failure to submit the required report can lead to both criminal penalties and civil penalties.

To file their initial report, reporting companies will use the filing system on FinCEN’s website. They will provide information like their:

  • Legal name
  • Trade names
  • Main Address
  • Where they were formed
  • Taxpayer identification number

Business entities formed after January 1, 2024, also need to give details about company applicants (filers or people who formed the company) and beneficial owners (those who have substantial control or own at least 25%). For these parties, businesses must disclose their:

  • Name
  • Date of birth
  • Address
  • Identifying number from a non-expired document like a driver’s license

Updating Your Filing

After the filing requirement is active again, if any information changes from a previous report, an updated report must be submitted for the secretary of state’s review within 30 days. The BOIR protects national security and not meeting its requirements can lead to serious penalties. For additional information or to contact FinCEN check out FinCEN’s BOIR FAQ page on their official website at https://www.fincen.gov/boi.

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