For now, business information ownership reporting requirements under the Corporate Transparency Act remain voluntary for small businesses despite the U.S. Supreme Court on Thursday overturning an order from a Texas federal appeals court in December in the case Texas Top Cop Shop v. Garland that had halted mandated BOI report filing with the Treasury Department’s Financial Crimes Enforcement Network.
That’s because there’s a separate nationwide order issued by a different Texas judge that remains in place in the case Samantha Smith v. U.S. Department of the Treasury. Because of that case, the Treasury Department is currently not requiring reporting companies to provide their BOI details to FinCEN.
On LinkedIn early Thursday evening, Melanie Lauridsen, vice president of tax policy and advocacy at the AICPA, tried to clear up confusion following the Supreme Court’s decision.
There has been a lot of confusing information regarding BOI – here is the best and most updated information:
1. There is still a BOI injunction in place. #SCOTUS lifted the injunction in the Texas Top Cop Shop case. However, the Samantha Smith case is keeping an injunction in place. Though Samantha Smith is applicable to the plaintiffs only, the courts set a nationwide injunction.
2. Filing BOI reporting is voluntary until legal challenges are concluded.
3. We anticipate getting guidance from Financial Crimes Enforcement Network, US Treasury soon.
That guidance came this morning as FinCEN released a statement saying, “In light of a recent federal court order, reporting companies are not currently required to file beneficial ownership information with FinCEN and are not subject to liability if they fail to do so while the order remains in force. However, reporting companies may continue to voluntarily submit beneficial ownership information reports.”
The statement from FinCEN goes on to say, “On January 23, 2025, the Supreme Court granted the government’s motion to stay a nationwide injunction issued by a federal judge in Texas (Texas Top Cop Shop, Inc. v. McHenry—formerly, Texas Top Cop Shop v. Garland). As a separate nationwide order issued by a different federal judge in Texas (Smith v. U.S. Department of the Treasury) still remains in place, reporting companies are not currently required to file beneficial ownership information with FinCEN despite the Supreme Court’s action in Texas Top Cop Shop. Reporting companies also are not subject to liability if they fail to file this information while the Smith order remains in force. However, reporting companies may continue to voluntarily submit beneficial ownership information reports.”
The National Federation of Independent Business—a strong opponent of the BOI reporting requirements, calling them “a harmful mandate” for small businesses—said in a statement on Jan. 23 that it was disappointed with the Supreme Court’s decision.
“Today’s decision is a setback for small business,” said Beth Milito, vice president and executive director of NFIB’s Small Business Legal Center. “Hopefully, Treasury recognizes the chaos that will ensue by requiring 32 million small businesses to imminently file their BOI information while the constitutionality of the reporting requirements is determined. As the next steps become clear, NFIB will inform small businesses on how to proceed.”
Passed in January 2021, the Corporate Transparency Act is an anti-money laundering law that directs businesses to report their ownership structures to FinCEN, which is overseen by the Treasury Department. The thinking is that clear ownership structures make it more difficult for bad actors to use shell companies for illicit activities like money laundering or drug trafficking.
Proponents of the Corporate Transparency Act and BOI reporting celebrated the Supreme Court’s ruling on Jan. 23.
“Today’s order is a blow to fentanyl dealers, human traffickers, terrorists, corrupt foreign leaders, and other criminals that use anonymous companies to launder the proceeds of their illegal activities,” Scott Greytak, director of advocacy for Transparency International US, said in a statement. “Nearly 85% of all countries in the world have committed to collecting beneficial ownership information to protect against abuse of their financial systems. It is astonishing that the plaintiffs in this case believe the United States isn’t capable of doing the same. The order from the Supreme Court to stay this injunction should serve as a clear sign to the other courts currently weighing misguided challenges to the CTA that the law is constitutional.”
“For years, police and prosecutors have tried to combat a flood of dirty money associated with often violent crimes, but that can’t happen if they run into a wall of shell companies and secrecy,” said Ian Gary, executive director of the FACT (Financial Accountability & Corporate Transparency) Coalition. “Today’s order is a reminder of the urgency of opening the money trail so our law enforcement officials can crack down on criminals who abuse the system.”
Elaine Dezenski, senior director and head of the Center on Economic and Financial Power at the Foundation for Defense of Democracies, added, “The Supreme Court’s decision to allow enforcement of the Corporate Transparency Act reaffirms what we already know: that the CTA is urgently needed to empower U.S. officials to protect national security at a time when we must show strength and global leadership. Foreign adversaries and criminals move billions through our economy using opaque shell corporations, propping up kleptocratic regimes, enabling drug cartels, and undermining democracy. While we spend trillions on our military capability, we leave the front door open to the illicit finance that emboldens and enriches our adversaries. The CTA closes this major security vulnerability.”
Every limited liability company, corporation, or other entity that was created by filing a document with a secretary of state or equivalent office must file a BOI report unless it qualifies for one of the Corporate Transparency Act’s exemptions. For example, the 65,000-plus members of the National Small Business Association (NSBA) are exempt because they won a previous lawsuit over the requirement.
The following current information would have to be reported about each of the company’s beneficial owners:
- Legal name
- Birthdate
- Residential address
- Unique number and issuing jurisdiction from a passport, driver’s license, or state ID, and an image of the document.
Opponents of BOI reporting say the requirements invade small business owners’ privacy, place an unnecessary burden on their operations, and potentially violate their constitutional rights by forcing disclosure of private information.
“While we appreciate the Supreme Court intervening on this issue—something we have been seeking in our own lawsuit—this creates even more uncertainty for our members and the millions of small businesses we represent. This burdensome rule could result in well-intending, but justifiably confused, small businesses to pay fines up to $591 per day and up to two years of jail time,” NSBA President and CEO Todd McCracken said in a statement on Thursday. “And while any member of NSBA as of March 1, 2024 is exempt from this rule, NSBA cannot stand by and let this unfair burden ensnare countless other small businesses. I cannot stress enough what a major problem this back-and-forth and the massive uncertainty it creates is for the millions of small businesses across this country. I cannot stress enough how important it is that Congress move forward on efforts to delay and repeal the CTA. NSBA filed the first lawsuit in the nation against the CTA, and we will continue to pursue every legal avenue to overturn this unconstitutional rule. We will push for Congress to do the right thing and see the CTA for what it truly is: a burden of uncertainty and confusion that will do very little to actually stop money laundering. On behalf of the millions of small business owners who will now be subject to the BOI regime, I implore FinCEN to proceed with prudence and patience in setting any new deadline.”
A Jan. 1, 2025, deadline had been set for reporting companies to file their BOI reports with FinCEN. But FinCEN extended the reporting deadline to Jan. 13 after a federal court of appeals lifted an injunction on Dec. 23 that had halted the new law.
But a few days later, a judge reinstated the nationwide injunction, thus suspending the BOI filing deadline once again.
As of today, FinCEN has yet to announce a new BOI reporting deadline.
Earlier this month, the Justice Department filed an emergency request with the U.S. Supreme Court requesting that the BOI reporting requirements be resumed.
In his concurring opinion regarding the Supreme Court’s Jan. 23 decision to lift the injunction, Justice Neil Gorsuch wrote, “I agree with the Court that the government is entitled to a stay of the district court’s universal injunction. I would, however, go a step further and, as the government suggests, take this case now to resolve definitively the question whether a district court may issue universal injunctive relief.”
In her dissenting opinion, Justice Ketanji Brown Jackson wrote, “However likely the Government’s success on the merits may be, in my view, emergency relief is not appropriate because the applicant has failed to demonstrate sufficient exigency to justify our intervention. I see no need for this Court to step in now for at least two reasons. First, the Fifth Circuit has expedited its consideration of the Government’s appeal. Second, the Government deferred implementation on its own accord—setting an enforcement date of nearly four years after Congress enacted the law—despite the fact that the harms it now says warrant our involvement were likely to occur during that period. The Government has provided no indication that injury of a more serious or significant nature would result if the Act’s implementation is further delayed while the litigation proceeds in the lower courts. I would therefore deny the application and permit the appellate process to run its course.”
The Supreme Court’s order, which was issued by Justice Samuel Alito, didn’t provide any justification for granting the requested stay of the injunction, but it’s a significant win for the government, which repeatedly had sought to lift the nationwide injunction, said law firm Miller & Chevalier in a legal alert on Thursday.
“Even with the Supreme Court’s decision, the manner in which the Trump administration will implement the CTA remains unclear,” the law firm said. “In response to questions regarding the CTA during the Senate confirmation process, Treasury Secretary nominee Scott Bessent acknowledged that BOI can be a valuable tool to assist law enforcement efforts but underscored that efforts to combat illicit finance should not create ‘unnecessary regulatory requirements that are inconsistent with U.S. law and harmful to law-abiding U.S. individuals and businesses.’ He further committed to ‘reviewing the regulatory implementation of the CTA to ensure that Treasury meets the law’s objective of combating illicit finance without unduly burdening small businesses as Congress directed.’”
Now all eyes will be on Texas, as a three-judge panel at the 5th U.S. Circuit Court of Appeals will hear oral arguments on the constitutionality of the Corporate Transparency Act on March 25.
“However, even if successful in striking down the injunction at the 5th Circuit, the government has been granted, with the Supreme Court’s ruling today, a stay of the injunction pending any writ of certiorari and ultimate ruling by the Supreme Court,” the law firm Seyfarth Shaw wrote in a legal update on Jan. 23.
In an alert to clients today, Portland, ME-based accounting firm Albin, Randall & Bennett recommended that business owners collect and organize up-to-date records of BOI, stay informed about regulatory updates and developments, and be prepared to comply promptly if the reporting requirements are reinstated.
Other CPAs and small business advisors are recommending business owners voluntarily file their BOI reports now just to be on the safe side.
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Tags: Accounting, Small Business
