You’ve likely heard buzz about the U.S. District Court for the Northern District of Alabama’s March 1, 2024, ruling that the Corporate Transparency Act (CTA) is unconstitutional because it oversteps Congress’s legislative authority. As a result, plaintiffs in the National Small Business United (NSBU) et al. v. Yellen case may pass (for now) on filing Beneficial Ownership Information (BOI) reports to the Financial Crimes Enforcement Network (FinCEN).
My team at CorXec has talked with many concerned and confused business owners. They want to know if this means they don’t have to file a BOI report and are looking for insight about what to do. We’re here to arm you with knowledge to help you make an informed decision, and we suggest speaking with an attorney for guidance related to your specific circumstances.
What’s at Risk
First things first, what might happen if you are required to file a BOI report and neglect to do so? If you’re considering a wait and see approach before filing, it’s critical to understand the potential impact of failing to file, filing late, or filing fraudulent information. Individuals and entities can be held liable for willful violations. Noncompliance with the CTA’s BOI reporting rule could potentially result in civil penalties of up to $500 for each day the violation continues, criminal penalties with up to two years imprisonment, and a fine of up to $10,000.
Does This Ruling Suspend the BOI Reporting for All Reporting Companies?
No. FinCEN agreed to comply with the court’s order to suspend the BOI reporting requirement for plaintiffs in the case, but it intends to enforce BOI reporting for everyone else.
Here’s the bureau’s official statement (as updated on March 11, 2024):
On March 1, 2024, in the case of National Small Business United v. Yellen, No. 5:22-cv-01448 (N.D. Ala.), a federal district court in the Northern District of Alabama, Northeastern Division, entered a final declaratory judgment, concluding that the Corporate Transparency Act exceeds the Constitution’s limits on Congress’s power and enjoining the Department of the Treasury and FinCEN from enforcing the Corporate Transparency Act against the plaintiffs. The Justice Department, on behalf of the Department of the Treasury, filed a Notice of Appeal on March 11, 2024. While this litigation is ongoing, FinCEN will continue to implement the Corporate Transparency Act as required by Congress, while complying with the court’s order. Other than the particular individuals and entities subject to the court’s injunction, as specified below, reporting companies are still required to comply with the law and file beneficial ownership reports as provided in FinCEN’s regulations.
FinCEN is complying with the court’s order and will continue to comply with the court’s order for as long as it remains in effect. As a result, the government is not currently enforcing the Corporate Transparency Act against the plaintiffs in that action: Isaac Winkles, reporting companies for which Isaac Winkles is the beneficial owner or applicant, the National Small Business Association, and members of the National Small Business Association (as of March 1, 2024). Those individuals and entities are not required to report beneficial ownership information to FinCEN at this time.
Therefore, entities, owners, and company applicants who are not already exempt or not one of the plaintiffs in NSBU v. Yellen continue to be required to file beneficial ownership information per the CTA’s deadlines:
- New reporting companies created in 2024 must file their BOI report within 90 days of their formation.
- New reporting companies created on or after January 1, 2025, must file their BOI report within 30 days of their formation.
- Existing reporting companies created before January 1, 2024, must file their BOI report by January 1, 2025.
No national injunction is in effect at this time to revoke the beneficial ownership information reporting rule nationwide and whether U.S. district courts in other states will encounter cases similar to NSBU v. Yellen remains to be seen.
Also, the U.S. Treasury Department has appealed the court’s ruling to the United States Court of Appeals for the Eleventh Circuit. If that appeal is successful, the plaintiffs in the case will likely also have to comply with the reporting requirement.
What Now?
If you need assistance determining whether to proceed with filing a BOI report, we encourage you to seek the guidance of an attorney who can advise you on the implications of your decision. Know that if you decide to move forward, CorXec is here to prepare your filing for you and securely submit it to FinCEN.
CorXec Can Help You File Your BOI Report
CorXec is here to help file beneficial ownership information reports for LLCs, Corporations, and other business entities.
