The Corporate Transparency Act Could Be Repealed, So Do You Need to File a BOI Report?

The Beneficial Ownership Information (BOI) Reporting Rule, with its steep financial (and even criminal) penalties for failing to comply, has caused fear and confusion among small business owners nationwide. Adding to the bewilderment is that some U.S. legislators are now calling for the Corporate Transparency Act (CTA), the law that mandates BOI reporting, to be repealed.

So what might we expect, and what are business owners to do if they haven’t already filed their BOI report with the U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN)?

Here’s what to consider.

Who must submit a BOI report under the Corporate Transparency Act?

The beneficial ownership information reporting requirement went into effect on January 1, 2024. It requires domestic and foreign business entities that match FinCEN’s definition of a “reporting company” to file a report disclosing information about their beneficial owners and company applicants.

Tens of millions of small businesses (with 20 or fewer full-time employees and $5 million or less in gross receipts or sales) meet the criteria and, therefore, must submit a BOI Report.

• Domestic reporting company—A corporation, LLC, or any business entity created through filing a registration document with a secretary of state (or similar) office under the law of a state or Indian tribe.

• Foreign reporting company—A corporation, LLC, or other entity formed under the law of a foreign country that filed a document with a secretary of state or any similar office to register to do business in any U.S. state or tribal jurisdiction.

Sole proprietorships and general partnerships do not have to report their business ownership information because they are not registered legal entities. And FinCEN has named 23 types of companies that may qualify for an exemption from the reporting rule. If there’s any doubt about whether or not your company must file a BOI report, it can be helpful to speak with an attorney for guidance.

How likely is it that the CTA will be overturned?

Currently, two bills are calling for the repeal of the CTA. Congressman Warren Davidson (R-OH) introduced HR 8147 on April 29, 2024, in the U.S. House of Representatives, followed by U.S. Senator Tommy Tuberville’s legislation (S 4297) introduced on May 9, 2024, to overturn the law, citing that it represents “big-government overreach at its worse.” Over 100 trade organizations—including the National Federation of Independent Business, National Franchisee Association, and Small Business & Entrepreneurship Council—support the repeal efforts.

Will these bills pass in the Senate and House? If so, will the President approve them? When can we expect to know?

These remain uncertainties, and like anything else that requires Congressional attention, we may be waiting and wondering for a while!

If the law isn’t repealed, what are the risks of not filing?

If the CTA survives and BOI reporting remains mandatory, businesses considered reporting companies that willfully provide false (or fraudulent) information in a BOI report or willfully fail to file a complete or updated BOI report could face civil penalties of $591 per day for each day the violation continues (up to $10,000) and criminal penalties of up to two years in prison.

Deadlines for reporting are as follows:

• Existing reporting companies created or registered to do business before January 1, 2024, must file their initial BOI report by January 1, 2025.

• New reporting companies created or registered on or after January 1, 2024, and before January 1, 2025, must file their initial BOI report within 90 days of the entity’s formation.

• New reporting companies created or registered on or after January 1, 2025, must file their initial BOI report within 30 days of the entity’s formation.

• Reporting companies must correct any errors made on their BOI report by filing a corrected report within 30 days of realizing the information is inaccurate.

Keep in mind that gathering the necessary information for a BOI report could require days or weeks depending on the size and ownership structure of the business. Wishfully waiting for a repeal that never comes to fruition could put business owners in jeopardy of missing their BOI report deadline.

Ultimately, you must decide whether to move forward now and comply with the current law or take a wait-and-see stance to see if it’s overturned. If you choose to file a report, FinCEN provides a secure electronic filing system, the BOI E-Filing System for reporting beneficial ownership information, that is relatively simple to navigate.