Indiana Business Law Blog
As we discussed in our prior update, a federal court in Texas has issued a preliminary injunction against the Corporate Transparency Act (CTA) reporting requirement, the Beneficial Ownership Information Report (BOIR). (You may recall that the CTA requires companies created before 2024 to file BOIRs before January 1, 2025; new companies formed in 2024 to file within 90 days of their creation; and new companies formed after 2024 to file within 30 days of their creation.)
The Financial Crimes Enforcement Network (FinCEN) has issued a statement that all reports during the preliminary injunction are considered “voluntary” and there will be no penalty for reporting companies who fail to file during that period. In their statement, FinCEN maintains that they believe the CTA is constitutional and vital in protecting the United States and its citizens from financial and other crimes.
What does this statement mean, if anything, for your small business?
As of right now, reporting companies need not report as long as the injunction of the Eastern District of Texas is in place unless they want to voluntarily. If your organization was created in the last 90 days and you have yet to file a report, you are not subject to liability during the period of the injunction. But if the injunction is lifted, how quickly will that penalty be put back in place? Similarly, for companies in existence prior to January 1, 2024, what happens if the injunction is lifted just before the New Year and all the companies who held off are scrambling to get their BOIRs in? What about if you form your company after the start of the year 2025, does the 30 day window to file start the day the injunction is lifted or will reporting companies have to file immediately?
One would hope the Court, the Department of the Treasury, and FinCEN would all take this into account and provide some time to comply if the injunction is lifted, but at this point there is no way to know for sure.
Our thoughts are still the same that we expressed in our last update: Given that the rule is technically still in place and only its enforcement is enjoined, it may be a good idea for companies to file voluntarily out of an abundance of caution, but we expect that most companies will refrain from filing. In this case, we believe it may be wise to have the BOIR completed and ready to be filed just in case the injunction is lifted so that you are not scrambling to meet the deadline.
We will post other articles as we learn more about this seemingly ever-changing requirement.
For more information or to schedule a consultation, please contact Harshman Ponist Smith & Rayl, LLC today. Our team is ready to provide the legal support you need.