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In recent months, businesses across the United States have been closely watching developments regarding the Corporate Transparency Act (CTA) and its Beneficial Ownership Information (BOI) reporting requirements. A new continuing resolution (spending bill) has introduced significant changes to the timeline for these reporting obligations, affecting both new and existing entities. Here’s what you need to know.
What Is the Corporate Transparency Act (CTA)?
The CTA was enacted in January 2021 as part of the National Defense Authorization Act (NDAA). It requires certain businesses to disclose their beneficial ownership information to the Financial Crimes Enforcement Network (FinCEN). The goal of the CTA is to combat illicit financial activities like money laundering, terrorism financing, and tax evasion by increasing corporate transparency.
Under the original rules:
Businesses formed before January 1, 2024 were required to submit their BOI reports by January 1, 2025.
Businesses formed on or after January 1, 2024 were required to file their BOI reports within 90 days of formation.
However, recent legislative and judicial actions have reshaped these requirements.
The Continuing Resolution: Key Changes
Congress recently introduced a continuing resolution to prevent a government shutdown. This resolution not only extends federal funding but also includes provisions delaying the implementation of the CTA’s BOI reporting requirements by one year. Specifically, the bipartisan bill amended 31 U.S.C. 5336 to include the following changes:
Businesses formed or registered before January 1, 2024 now have until January 1, 2026 to submit their BOI reports to FinCEN.
Businesses formed or registered on or after January 1, 2024, and before January 1, 2025, still have 90 days to file an initial report. However, this requirement is currently voluntary due to the preliminary injunction.
Businesses formed or registered on or after January 1, 2025, must file their initial reports within 30 days of formation or registration. This requirement is also currently voluntary.
These changes provide additional time for businesses to comply and allow courts to resolve ongoing legal challenges to the Corporate Transparency Act.
Judicial Developments: Nationwide Injunction
In addition to the legislative delay, a recent nationwide injunction issued by a federal judge in Texas has temporarily halted the enforcement of the CTA’s reporting requirements. The court’s preliminary injunction raises constitutional questions about the CTA, effectively pausing BOI reporting obligations for all businesses. The injunction is currently under expedited review by the Fifth Circuit Court of Appeals, adding further uncertainty.
What This Means for Businesses
With both the legislative delay and the judicial injunction in place, businesses are not currently required to submit their BOI reports. However, this does not mean businesses should ignore the requirements altogether. Here are some steps to take:
Educate Yourself and Clients: Use this additional time to understand the reporting requirements and educate your clients or stakeholders about their obligations.
Prepare Documentation: Gather beneficial ownership information now, so you are ready to comply once the requirements are reinstated.
Provide Options: Businesses should decide whether to voluntarily comply with the reporting requirements or wait until the courts resolve the legal challenges. Tax professionals and advisors can help provide guidance tailored to each entity’s needs.
Seek Legal Guidance: Consult with a legal professional to ensure readiness for compliance.
Looking Ahead
The extension granted by the continuing resolution and the ongoing judicial injunction offers businesses much-needed time to prepare for the BOI reporting requirements.
However, this reprieve should not be viewed as an opportunity to delay preparations indefinitely. Businesses and tax professionals should use this time wisely to educate themselves and develop a strategy for compliance.
Ultimately, giving businesses agency over their compliance decisions—whether to voluntarily report now or wait for legal clarity—is key to navigating these evolving requirements.
Stay tuned for further updates on the CTA, the continuing resolution, and what they mean for businesses nationwide.
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