BOI Reporting Deadline Extended in Wake of Appeals Court Decision

Small businesses across the U.S. this week got a 13-day extension to file their ownership records following an appeals court decision that upholds a federal transparency law. 

The deadline, originally Jan. 1, is now Jan. 13. But this beneficial ownership information (BOI) reporting requirement will remain a burden for small businesses as it is expected to cost them hundreds of billions of dollars.  

This new development is just the latest in less than a month surrounding a legal battle pitting constitutional protections against an effort to combat money laundering and terror financing.  

Inside the fight 

The U.S. Treasury, specifically its Financial Crimes Enforcement Network (FinCEN), argues that the latter is the reason for the Corporate Transparency Act (CTA). But FinCEN admits compliance will cost small businesses $126.3 million in the first year alone and $35 million annually thereafter. 

It’s also an egregious overreach of federal government authority, according to the U.S. District Court for the Eastern District of Texas, which issued a preliminary injunction on Dec. 3 in the case Texas Top Cop Shop, Inc., et al. v. Garland, et al.  

The plaintiffs convinced U.S. District Judge Amos Mazzant that the CTA exceeds Congress's authority by infringing upon states' rights under the Tenth Amendment, while violating the First and Fourth Amendments by compelling speech and mandating the disclosure of private information.  

The federal government then turned to the appellate level of the judiciary and on Dec. 23 the U.S. Court of Appeals for the Fifth Circuit lifted the injunction. 

Deadline details 

FinCEN claims it recognizes the flux this has created among small businesses, hence the extension, and these are the latest deadlines:  

• Entities Created or Registered Before January 1, 2024: The deadline to file initial BOI reports has been extended to January 13, 2025. 

• Entities Created or Registered Between January 1, 2024, and December 31, 2024: 
  • For entities formed between September 4, 2024, and December 23, 2024, with original deadlines falling during the injunction period, the new deadline is January 13, 2025.
  • Entities formed between December 3, 2024, and December 23, 2024, have an additional 21 days from their original filing deadlines. 
    
• Entities Created or Registered On or After January 1, 2025: These entities must file BOI reports within 30 days of their formation or registration. 

What comes next 

Any failure to comply exposes small businesses to daily fines of $500 and potential criminal charges. But they can continue to fight by taking the case to the U.S. Supreme Court.

If this occurs, and the high court even accepts the case, it's hard to tell what it would do, based on recent decisions.  

In National Federation of Independent Business v. Sebelius (2012), which addressed the limits of federal authority under the Commerce Clause, the Court upheld the Affordable Care Act's individual mandate but underscored significant constraints on federal power. This precedent suggests that the CTA’s opponents might find grounds for challenging the law on similar constitutional principles. 

On the other hand, the majority of justices supplanted both states’ rights and interstate commerce laws when it ruled last year that pork products sold in California must come from sows with at least 24 square feet of living space, or an area slightly smaller than a full-size mattress. This means even pork that comes from farms in places like Oklahoma would have to meet California’s requirements. 

While all this precedent is contemplated, accountants and small businesses should prepare themselves to comply with the CTA, at least through January of 2025.