On December 3rd, a U.S. District Court Federal Judge made an important decision regarding compliance with the Corporate Transparency Act and what is commonly known as BOI reporting.

Of the 33 million expected BOI filers, as of mid November about 7 million had filed. So if you are a business owner subject to BOI reporting that has not filed, you are in the majority! Our best data indicates our client population actions are similar to those of the country. We ask that you closely read and analyze the information contained herein and then please let us know what action you are going to take by indication below.  

If you have already filed your BOI reporting due with FinCEN in compliance with the Corporate Transparency Act (or are exempt as we have previously communicated) please disregard this email update, as you would have no action to take. In an effort to make sure we promptly relayed this breaking news, we are not able to cross reference our original BOI email listing with those who have completed filings given the time constraints, the nature of the data we have available, and the project information to date, so please forgive us if you have completed this process and are still receiving this update. 

Executive Summary:

• On December 3, 2024, the U.S. District Court for the Eastern District of Texas issued a nationwide preliminary injunction temporarily suspending the Corporate Transparency Act and the Beneficial Ownership Information (“BOI”) reporting requirements.
• It is expected that the government may seek an expedited appeal of the decision and request a stay of the order of the district court.
• Unless the District Court decision is overturned by appeals, reporting BOI information is temporarily not required under the terms of the temporary injunction.
• If the U.S. Court of Appeals for the Fifth Circuit overturns this injunction in whole or in part, companies that have not yet filed their initial BOI reports will still have to do so by January 1, 2025, unless other action is taken to further delay the due date.
• There is speculation that an expedited appeal may take a week or so to be issued, but timing is uncertain.
• There is no way to ascertain what the outcome of the appeal (if one is filed) may be, what action Treasury may take to administratively delay the deadline given this new element of uncertainty that has been introduced, or if Treasury will generally yield to multiple letters signed by dozens of congress members encouraging FINCEN to delay the filing due date. 
• FINCEN is still receiving, and will continue to process, all BOI filings through the online filing system.
• There is concern that the BOI filing system may crash if it is overwhelmed with a mad rush given the number of businesses that have not filed, and business filing may not be able to be processed timely.
• Realistically, the government has access to much of the information that is being required, though it is in disparate governmental databases.
• Our clients are seeking guidance from us on what actions one might consider given this new development.

We believe that companies which are not exempt and who have not yet filed their initial BOI report generally have the following options:

1. Go ahead and self-file or hire someone other than Blankenship to file your BOI reporting and be prospectively in compliance prior to January 1, 2025, regardless of the outcome. 
2. Engage Blankenship to file your BOI report prior to January 1, 2025, and be prospectively in compliance regardless of the outcome. We still have time to process several hundred reports with our team, but time is of the essence. You will need to provide us with all your information and engage us to perform the filing prior to December 13 so we can complete these before Christmas and New Year holiday time off for our team arrives.
3. Gather the required information and be prepared to self-file, or have someone other than Blankenship to file, your BOI reports at such time the temporary injunction is overturned and the due date of prior to January 1, 2025 is reestablished, or otherwise adjusted with subsequent administrative judicial, administrative, or legislative action.
4. Engage Blankenship to file your BOI report, but you want to wait and see what develops, and then have us file at such time the injunction is overturned and prior to the due date whenever that may be. If you choose this course of action we will still need you to engage the firm and provide all reporting information to Blankenship by Friday, December 13. The time frame between the injunction being overturned and the January 1, 2025 filing deadline may be short, as previously noted the system may very well be inundated and crash, and we cannot guarantee that we would be able to file your BOI report timely as we may run out of time.

Detailed Information:

On December 3, 2024, the U.S District Court for the Eastern District of Texas issued a nationwide preliminary injunction temporarily suspending the Corporate Transparency Act and the BOI reporting requirements. It is expected that the government may seek an expedited appeal of the decision and request a stay of the order of the district court.  

As of the date of the injunction, BOI reporting is not required. However, if the U.S. Court of Appeals for the Fifth Circuit overturns this injunction in whole or in part, companies required to file BOI reports will still have until January 1, 2025 to file their initial BOI report. There is speculation that an expedited appeal may take a week or so to be issued, but timing is uncertain.

FinCEN is still open for business and will accept BOI reports during the injunction period. If you believe the Appeals court will overturn the injunction ruling, you should go ahead and file your BOI report. Many companies will opt to wait for the court outcome prior to filing their BOI reports. If this is the case, companies should still be gathering their information and be prepared to file in anticipation of the Appeals court overturning the ruling.  

BOI reporting was designed to be simple and most simple equity structure single tier companies should be able to self-file their initial BOI reports on the FinCEN website. We recommend utilizing FinCEN IDs as a best practice, as it shifts updating requirement risk to the FinCEN ID holder instead of the company in certain cases, but not all. There is no harm in filing the BOI information as the government already has access to the information requested through tax return data and through data exchanges with each state’s Department of Motor Vehicles. BOI reporting requires beneficial owners to upload a copy of their driver's license, provide personal information such as your full name, address, and date of birth, and information regarding the company to which you own, including ownership percentages, and the name and address of the business entity.

If you would like to engage Blankenship to assist you with your BOI reporting, please promptly contact your CPA so an engagement letter can be issued. Once engaged, we can go ahead and file your report if you believe the injunction will be overturned or simply want to prospectively comply to avoid potential exposure. If you wish to wait to see if the injunction is overturned, we will need your information to file the BOI report and we must be both engaged and receive your requisite information by Friday, December 13, 2024. We will hold your information until the injunction has been overturned. Because the reversal could happen with little time between the Appeals court action and the due date of the BOI reports (and due to the upcoming holiday season), we cannot guarantee that we would be able to timely file the BOI reports.

For additional information regarding the filing of BOI reports, please refer to our website (551827.com), or previous communication on this matter, or the Financial Crimes Enforcement Network website (fincen.gov/boi).

We will continue to monitor the situation and seek input from our attorney contacts to determine how to navigate this fluid situation. We will update you with a communication as things develop.

Here are some key points to remember as you consider:

1. Who Needs to Comply? This includes domestic and foreign companies including corporations, LLCs, or similar entities that have registered or formed their company with a state (such as a Secretary of State’s Office) or tribal office. However, some domestic entities registered in this way are exempt.
2. Exemptions: There are 23 exemptions, such as for publicly traded companies, banks, and certain inactive entities. Also, many larger domestic operating companies with over 20 full-time employees and more than $5 million in receipts may meet exemption #21 if additional specific criteria are met. As noted below there are specific penalties if you fail to comply. https://www.fincen.gov/sites/default/files/shared/BOI_Small_Compliance_Guide.v1.1-FINAL.pdf
3. Beneficial Owners: These are individuals who either have significant control over a company or own/control at least 25% of its interests. This will include both owners as well as officers or those with substantial authority to transact business (those who exercise “substantial control”).
4. Filing Deadlines: All reporting entities formed on or before 12/31/23 must file by the end of 2024.  For newly formed entities in 2024, you must file within 90 days.  For entities created in 2025 and after, the filing must be made within 30 days of formation. For all changes in BOI, an update must be filed within 30 days once registered. This is why procuring a FinCEN identifier as discussed below is important.
5. Required Information: Companies must provide details like their name, address, and tax ID. They also need to report information about beneficial owners, including their personal details and identification documents such as a driver’s license or passport. The firm has determined that utilizing the Individual FinCEN Identifier process for all beneficial owners when there is more than one "beneficial owner" is the best practice for a long list of reasons.
6. Penalties for Non-Compliance: Businesses that willfully fail to comply can face civil penalties of up to $591 for each day the violation continues, imprisonment of up to two years, and/or a fine of up to $10,000. Senior officers of an entity that fails to comply may also be personally held liable.

Blankenship CPA Group, PLLC will not automatically handle this reporting unless specifically hired for the service. Completing BOI reporting is not part of any Tax, Audit, Accounting, or any other ongoing engagement you have with the firm. It must be separately engaged. If you would like us to reach out to you about completing this service for you, please click the link directly below and we will reach out to you to begin the process. Our fees start at $750 to complete this filing on your behalf and we will require specific documents from you that exceed the standard information we already have from any existing engagement.