In a significant development, the Financial Crimes Enforcement Network (FinCEN) has appealed a nationwide injunction that temporarily halted the enforcement of the Corporate Transparency Act (CTA) and its Beneficial Ownership Information Reporting (BOIR) requirements. To further complicate the situation, FinCEN has also filed for an emergency stay - potentially overturning the court's decision to temporarily pause BOI filing requirements nationwide - and reinstating the original January 1, 2025, compliance deadline.

If this emergency request is approved, businesses across the United States could be immediately required to comply with the BOI reporting requirements, leaving limited time to prepare. Here’s what this means for businesses and how you can stay ahead of one of the most important compliance requirements for businesses in the United States in recent years. 

The Corporate Transparency Act (CTA), passed in 2021, is a key component of the U.S. government’s strategy to combat financial crimes like money laundering, terrorism financing, and tax evasion. The CTA requires many U.S. businesses—particularly smaller, privately held companies—to report their "beneficial ownership" information to FinCEN. This includes identifying the individuals who ultimately own or control the company.

In late 2023, a federal court issued a nationwide injunction blocking the enforcement of the CTA and BOIR regulations. The court cited concerns that the rules overstepped constitutional boundaries and imposed undue burdens on businesses, particularly small companies. For a time, the injunction appeared to offer businesses relief from the fast-approaching January 1, 2025, compliance deadline.

Following the injunction, FinCEN swiftly responded by appealing the court’s decision. As part of its legal strategy, the agency has also requested an emergency stay of the injunction. If granted, the stay would temporarily reverse the court’s ruling and reinstate the BOIR rules, allowing the agency to enforce the reporting requirements immediately.

This would mean that businesses previously exempt under the injunction would once again need to prepare for compliance with the CTA regulations in time for the original January 1, 2025, deadline.

An emergency stay is a legal tool used to pause or overturn a court decision while the appeal process is ongoing. In this case, FinCEN is asking the court to allow enforcement of the CTA to proceed immediately, arguing that delaying the rules undermines efforts to combat financial crime and ensure transparency in the corporate world.

For businesses, this means that compliance requirements - in this case January 1st 2025 - could be reinstated with little to no advance notice, requiring urgent action to avoid penalties.

The potential approval of an emergency stay could create significant uncertainty for businesses. Many small and midsize companies, which make up the majority of entities covered by the CTA, may find themselves scrambling to meet compliance obligations they thought were on hold. Here are some key considerations:

1. Compliance Timelines Could Be Tight:
   If the stay is granted, the original January 1, 2025, deadline for BOIR compliance will likely be reinstated, leaving businesses only weeks to submit their beneficial ownership reports.

2. Complexity of Reporting Requirements:
   The CTA requires companies to disclose detailed information about their beneficial owners, including full names, addresses, and identifying documentation. Gathering and submitting this information on short notice could pose challenges for companies unprepared for the regulatory shift.

3. Penalties for Non-Compliance:
   Businesses that fail to meet the reporting requirements could face significant fines and other legal consequences. The penalties for non-compliance under the CTA can reach up to $10,000, with potential criminal liability for willful violations.

Given the ongoing appeal and uncertainty surrounding the injunction, businesses should take a proactive approach to prepare for possible changes. Here are some steps to consider:

1. Evaluate Your Business’s Compliance Requirements:
   Review whether your company is subject to the CTA reporting rules. Many smaller, privately held companies are covered, but certain entities, like publicly traded companies, are exempt.

2. Gather Beneficial Ownership Information:
   Start collecting the required information on your company’s beneficial owners, including names, addresses, and identifying documents like driver’s licenses or passports.

3. Consult a Corporate Attorney:
   An experienced corporate law attorney can help you navigate the reporting requirements, ensure compliance, and stay updated on legal developments regarding the injunction and FinCEN’s appeal.

4. Stay Informed:
   Monitor updates on FinCEN’s appeal and the emergency stay request. A decision on the stay could come quickly, so staying informed will help your business respond promptly to any changes.

The ongoing legal battle over the Corporate Transparency Act has left businesses in a state of uncertainty. With FinCEN’s appeal and emergency stay request, the potential for a swift reinstatement of reporting requirements means businesses need to act now. Proactively preparing for compliance will help mitigate risks and ensure your company stays ahead of these regulatory filing requirements. 

Need help with the Beneficial Owner Information Report with FinCEN?

Contact Della Torre Law PLLC