Corporate Transparency Act injunction lifted 

The Corporate Transparency Act has been ruled enforceable, and many small businesses have little time to file required reports by deadline. 

The U.S. Court of Appeals for the Fifth Circuit on Dec. 23 reinstated the reporting requirement, which had been halted by a Texas judge through an injunction. 

Originally, the beneficial ownership information reports were due by Jan. 1. That deadline has been extended for most companies to Jan. 13, according to a report in the Journal of Accountancy, provided to Springfield Business Journal by BRS CPAs & Advisors shareholder Jeff Shore.  

Those who fail to file by the deadline could face civil penalties of up to $591 per day until the report is submitted. Penalties also could include up to two years imprisonment. 

The U.S. Department of Treasury’s Financial Crimes Enforcement Network, or FinCEN, began accepting BOI reports on Jan. 1, 2024, and businesses have had almost a full year to comply with the requirement, which aims to clarify corporate ownership and crack down on money laundering and similar financial crimes, according to past SBJ reporting. 

An alert from FinCEN notes the Treasury “recognizes that reporting companies may need additional time to comply given the period when the preliminary injunction had been in effect.” 

The alert states that reporting companies created before Jan. 1, 2024, have until Jan. 13, 2025, to file their initial BOI reports. Other deadlines apply for newer companies or those qualifying for disaster relief. 

Moving forward, companies created or registered in the U.S. on or after Jan. 1, 2025, will have 30 days to file their initial BOI report. 

The temporary injunction halting the filing requirement was issued in Texas Cop Shop Inc. v. Garland on Dec. 3. The opinion pointed to what it called legislative ingenuity to solve the problem of bad actors cloaking criminal activities in a veil of corporate anonymity. But the mandate represents a federal attempt to monitor companies created under state law and ends anonymity permitted for corporate formation in some states, the decision stated. 

The 79-page opinion and order by Judge Amos L. Mazzant III stated, “Modern problems may well warrant modern solutions, but modernity does not grant Congress a roving license to legislate outside of the boundaries of our timeless, written Constitution. … The Constitution must stand firm.” 

The injunction halted some reporting efforts, but many CPAs, like Shore, urged companies to be ready to file when it was lifted. Attorney David K. Olive of Carnahan Evans PC projected in past reporting that if the injunction were to be lifted, businesses could be faced with a new 30-day deadline, so his advice was to keep gathering information and preparing for filing. That window turned out to be smaller than Olive’s forecast. 

“The teeth on this statute are too severe to just assume you will not be penalized,” Olive told SBJ earlier this month. 

The Corporate Transparency Act was passed by Congress in 2021 and requires a BOI report be filed by any corporation, limited liability company or other entity created by filing a document with a state-level secretary of state’s office. 

According to FinCEN, a beneficial owner is someone who owns or controls a company. Businesses must report the following information for every beneficial owner: name, birthdate, address, a unique identifying number from an identification document and an image of the identification document. 

Filing of BOI reports may be done online at the FinCEN website.