Understanding the Corporate Transparency Act: Essential Information for Companies
If you're a business proprietor, the dilemma of whether or not you're mandated to submit a Beneficial Ownership Information Report (BOIR) under the Corporate Transparency Act (CTA) might as well be shrouded in mystery. A December 3 injunction from the Eastern District Court of Texas, in the case of Texas Top Cop Shop, Inc. v. Garland, suspended the CTA's enforcement. However, on December 23, 2024, a three-judge panel from the U.S. Court of Appeals for the Fifth Circuit issued a halt on that decision, setting a January 13, 2025, deadline. Then, on December 26, 2024, the entire Fifth Circuit Court overturned the three-judge panel's decision, making this new deadline ineffective, momentarily.
Despite this legal rollercoaster, filing a BOIR might appear intimidating, but it's essentially straightforward. Here are replies to five common inquiries.
1. What is the CTA?
The CTA is a provision introduced in the Anti-Money Laundering Act of 2020 with the purpose of updating the nation’s attempts to stem money laundering and curb financing of terrorism. It makes it compulsory for businesses to declare their beneficial owners, i.e., those who ultimately own or run the enterprise, to deter businesses from being used for money laundering or other unlawful activities.
2. Why should I file my BOIR?
If the courts eventually rule in favor of the CTA's enactment, then failing to report your BOI could lead to fines and other criminal sanctions. The penalties can reach up to $10,000 in fines and/or two years in jail.
3. Where do I report my BOI?
The Financial Crimes Enforcement Network provides a free online platform for filing your BOIR. To submit your report, visit the BOI E-Filing System.
4. What information do I need to file?
You will require essential details about your business, such as its legal name, address, and tax ID number, as well as specifics about each beneficial owner, such as their full name, date of birth, address, and a valid identification number.
5. Do businesses currently have to report their BOI?
At present, businesses are not obligated to submit their BOIR. The Financial Crimes Enforcement Network's website states: “Please be advised that the beneficial ownership information reporting requirements have been impacted by a recent federal court order. The Department of the Treasury is contesting that order. In the meantime, reporting companies are not required to submit a BOIR and are not subject to liability if they fail to do so as long as the applicable order remains in force. However, reporting companies may choose to file a BOIR.”
It's, of course, an individual business owner's prerogative to decide whether or not to file their BOIR before the court's verdict. Nonetheless, doing so will barely require your time, and it might be worthwhile to file, so you're not required to constantly keep tabs on the CTA’s legal status.
Despite the ongoing legal challenges to the CTA's enforcement, the Financial Crimes Enforcement Network (FinCEN) encourages businesses to report beneficial ownership information (BOI) through their online platform, known as the BOI E-Filing System. Misunderstandings about the BOIR process often lead to the belief that reporting is optional, but FinCEN states that businesses are not liable for failing to file as long as the court-ordered stay is in effect. However, should the CTA eventually be upheld, failing to file beneficial ownership information could result in significant fines and criminal penalties, as stated in the Financial Crimes Enforcement Network Act of 2020.
