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FinCEN Files with U.S. Supreme Court to Reinstitute Filing Requirements

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UPDATE – January 3rd: The U.S. Supreme Court has engaged with DOJ’s request to stay the injunction against the Corporate Transparency Act.

Justice Alito has established a 4 p.m. deadline on January 10, 2025, for the plaintiffs in Texas Top Cop Shop to respond to the Department of Justice’s motion for a stay. This timeline suggests the Supreme Court is moving quickly to decide whether to reinstate BOI reporting requirements by suspending the preliminary injunction currently blocking enforcement of the Corporate Transparency Act (CTA). 

Late on New Year’s Eve, the U.S. Solicitor General on behalf of FinCEN filed an emergency application for a “Stay” on the injunction issued by the District Court in the Texas Top Cop Shop v. Garland case.

This means that at any time, the U.S. Supreme Court could choose to overturn the current injunction that makes Beneficial Ownership Information Reporting (BOIR) filing voluntary. If this occurs, similar to the roller-coaster that occurred on December 23rd when the Fifth Circuit Court of Appeals put a stay on the injunction  – the BOIR could once again become mandatory, with an imminent due date for entities formed prior to 2024 (although FinCEN would likely provide a short filing extension to at least January 13th in that eventuality).

Given all of this uncertainly, the two primary paths forward continue to be as follows:

  • Prepare to file your BOIR at a moment’s notice – pending further legal resolution of this high-stakes filing requirement, with the legal system poised to reinstitute the filing requirement at any time.
  • File your BOIR voluntarily – ensuring compliance now avoids the crazy roller-coaster with seemingly constant legal developments, combined with last-minute filing stress and possible civil and criminal penalty exposure for missing a filing window.

Ultimately, this reporting requirement is high-stakes, with onerous penalties that include civil fines of up to $591 per day, and criminal fines of up to $10,000 per report paired with up to two years of imprisonment. As such, if you choose to wait to file your BOIR, it is imperative that you monitor this legal battle for future daily developments, and are positioned to file at a moment’s notice.

Nationwide Beneficial Ownership Information Reporting on Hold Again

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In an unexpected development, the merits panel of the Fifth Circuit Appeals Court on December 26th essentially reinstated a nationwide injunction for Corporate Transparency Act (CTA) Beneficial Ownership Information Reporting (BOIR). This marked a sharp reversal from just three days earlier, when the court had granted the Government’s motion to “stay” the preliminary injunction and reinstated filing requirements.

This means that for all businesses nationwide, the crucial requirements to file BOIR have once again been temporarily suspended. The recently adjusted deadline of January 13, 2025 that applies to most businesses is essentially “paused” and no longer relevant as this legal battle continues.

The court explained its decision as necessary “to preserve the constitutional status quo while the merits panel considers the parties’ weighty substantive arguments”. The court also expedited the appeal to the “next available oral argument panel”, which it appears could be the week of January 6th based upon the court’s published schedule.

Given the rapid-fire recent legal developments around this reporting, further changes are highly possible. The status of the injunction or additional delays could shift again as courts continue to address the constitutional challenges to the CTA.

beneficial ownership information reporting on hold - secure compliance

So where do you go from here? The two primary paths forward are as follows:

  • Prepare to file your BOIR at a moment’s notice – pending further legal resolution of this high-stakes filing requirement.
  • File your BOIR voluntarily – ensuring compliance now avoids last-minute filing stress and possible civil and criminal penalty exposure if the requirement is ultimately upheld and you miss the filing window.

Ultimately, this reporting requirement is high-stakes, with onerous penalties that include civil fines of up to $591 per day, criminal fines of up to $10,000 per report, and up to two years of imprisonment. As such, if you choose to wait to file your BOIR, it is imperative that you monitor this legal battle for future daily developments. For a full copy of the most recent court decision – see this LINK.

Secure Compliance provides advanced technology solutions for professionals and businesses filing BOIR with FinCEN. We seek to make gathering information and filing the BOIR as painless and hassle-free as possible.

Prepare to File Your BOIR

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Pending continued legal developments on the status of the required Beneficial Ownership Information Reporting (BOIR), we recommend that you remain fully prepared for compliance.

Key steps to consider as part of preparation to file your BOIR include the following:

Obtain FinCEN IDs for Key Owners

If you haven’t already obtained FinCEN IDs for key beneficial owners, especially those that hold multiple entities, you may want to consider expediting obtaining these IDs. Obtaining a FinCEN ID can streamline reporting and also increase privacy for owners.

Engagement Management

For professionals and advisors, it is imperative to have a well-defined engagement letter or other contract with your client that clearly defines the scope of your work and your responsibilities.

Obtain and Document Key Entity Information

The designation of a “Beneficial Owner” includes both persons with direct or indirect ownership or control of more than 25% of an entity, or certain other persons with substantial control over the entity. Prior to filing, you should have a complete file documenting ownership and control persons of the business, including organization charts, governing legal documents, and ownership tables.

Account for Key Complexities

Make sure to account for additional key complexities when filing your BOIR, including:


Obtain Beneficial Owner Information

Included with each report will be either the FinCEN ID number for each Beneficial Owner, or the following information:

      • Full legal name
      • Date of Birth
      • Residential Address
      • A unique identifying number from an acceptable identification document (e.g. passport, driver’s license)
      • An image of the identification document


File Your BOIR

You have two primary options for filing a FinCEN Beneficial Ownership Information Report:

        1. File directly with FinCEN
        2. File with a third-party software provider like Secure Compliance. Benefits can include:
          • Secure data retention pending resolution of the BOIR legal battles
          • Automated data collection
          • Data entry speed and ability to link single owners across multiple entities
          • Streamlined bulk uploads
          • Expert support


Monitor for Developments

Additional developments are expected in the weeks to come, including FinCEN guidance and possibly changes to the law by a new Congress next year.

What is a FinCEN Identifier?

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FinCEN Identifiers can make sharing data less cumbersome and helpful to Owners and Applicants

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Defining a FinCEN Identifier

A FinCEN Identifier (FinCEN ID) is a unique identifying number issued to reporting companies , beneficial owners, and company applicants by the Financial Crimes Enforcement Network (FinCEN). This identifier was introduced in response to the Corporate Transparency Act, a federal law that will become effective on January 1, 2024. The primary purpose of a FinCEN ID is to streamline the process of updating or filing a Beneficial Owner Information Report (BOIR).

Why Get a FinCEN Identifier as an Individual?

Obtaining a FinCEN Identifier is voluntary, but it can offer several advantages:

  1. Data Security:
    One primary reason individuals seek a FinCEN ID is for enhanced data security. If you are a beneficial owner or company applicant, you may be concerned about sharing your personal data with multiple people. With a FinCEN ID, you can submit your information directly to FinCEN, bypassing the need for every company you are a beneficial owner for to have this sensitive information. This added layer of privacy can be appealing, especially for those who value confidentiality.
  2. Efficiency:
    Another significant advantage of having a FinCEN Identifier is administrative efficiency. Many individuals are associated with multiple companies, or they may act as company applicants for numerous reporting companies. Rather than repeatedly gathering and submitting the same personal information, a FinCEN ID simplifies the process. With this identifier, you can use the same number for all the companies you are involved with, and only submit your personal identifying information once to FinCEN – saving you time and effort.

How to Obtain a FinCEN Identifier

fincen identifier - what is a fincen identifier - secure complianceTo obtain a FinCEN Identifier, individuals must submit an application to FinCEN electronically. The application process is relatively straightforward, but it requires the submission of specific information, including:

  • Your legal name
  • Date of birth
  • Current residential address
  • A unique identifying number from a non-expired qualifying document, such as a state-issued driver’s license or passport
  • An image of the identifying document

Additionally, applicants must certify that the information provided is accurate and complete. The application is expected to be available through login.gov, and FinCEN estimates that it will take approximately 20 minutes to complete.

Reporting companies may also obtain a FinCEN Identifier, but they will choose to do so on their initial BOIR. Under the Reporting Company section of the form there will be a field where you can elect to get an ID immediately following the filing of the first report. The company would then benefit from entering this number in order for FinCEN to link to their previously filed report when filing any updates, corrections, or getting reported on other BOIRs.

Are You Prepared to File?

In summary, a FinCEN Identifier is a unique identifying number issued by FinCEN to streamline the process of filing a Beneficial Owner Information Report. While it is not mandatory, obtaining a FinCEN ID can enhance data security and administrative efficiency. Whether you seek to protect your personal information or save time when dealing with multiple companies, a FinCEN Identifier can be a valuable tool in navigating the complex world of financial regulations.

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Top 5 FinCEN BOI Exemptions

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The key filing exemptions for the new 2024 BOI ruling

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What Are the Primary FinCEN BOI Exemptions?

The Corporate Transparency Act (CTA) introduced new beneficial ownership reporting requirements set to be effective in 2024. Administered by the Financial Crimes Enforcement Network (FinCEN), these requirements aim to provide clarity on individuals who have significant control over reporting companies or possess substantial ownership interests. However, it’s crucial to recognize that certain entities are exempt from these reporting obligations. Here, we delve into the top five FinCEN BOI exemptions:

Large Operating Companies

These are companies that employ over 20 full-time employees in the U.S., maintain a physical operating presence within the country, and report gross receipts exceeding $5,000,000 on their federal income tax return for the previous year.

Inactive Entities

These refer to companies that were established on or before January 1, 2020, and are not actively engaged in business. They should not be owned by foreign individuals and must not possess any assets. Additionally, they should not have undergone any ownership changes or received funds exceeding $1,000 in the previous calendar or fiscal year.

Tax-Exempt Entities

Generally, these are entities described in Section 501c of the Internal Revenue Code (e.g., charitable organizations, churches and religious organizations, private foundations, political organizations, and/or other nonprofits).

Subsidiaries of Certain Exempt Entities

These entities have their ownership interests controlled or wholly owned, either directly or indirectly, by one or more entities, specifically:

Securities reporting issuer, governmental authority, bank, credit union, depository institution holding company, money services business, broker/dealer in securities, securities exchange or clearing agency, other Exchange Act registered entity, investment company or investment adviser, venture capital fund adviser, insurance company, state-licensed insurance producer, Commodity Exchange Act registered entity, accounting firm, public utility, financial market utility, tax-exempt entity, and/or a large operating company.

Accounting Firms

These are large public accounting firms with more than $5 million in gross receipts and 21 or more full-time employees, and public accounting firms registered with the Public Company Accounting Oversight Board (PCAOB).

Are You Prepared to File?

Overall, while the new BOI reporting requirements aim to enhance transparency and combat financial crimes, it’s essential for entities to assess their status and determine if they fall under any of the exemptions. If uncertain about your company’s obligations, consult with an attorney for a comprehensive assessment.

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What is the Corporate Transparency Act, Really?

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The Corporate Transparency Act is a critical, complex compliance ruling. Are you prepared?

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Introduction

In an era of increasing scrutiny of complex and anonymous ownership structures and an increasing focus on financial transparency, the Corporate Transparency Act (CTA) stands out as a crucial piece of legislation in the United States. So, what is the Corporate Transparency Act?

Most significantly, the CTA created new Beneficial Ownership Information Reporting (BOIR) which requires most legal entities to report information about formation, beneficial ownership, and control persons, with such reporting to begin January 1, 2024.

What is the Corporate Transparency Act?

Signed into law on January 1, 2021, the Corporate Transparency Act as a part of the National Defense Authorization Act represents a vital step in the fight against financial crime, money laundering, and illicit financial activities. The primary goal of the CTA is to enhance corporate transparency by requiring certain entities to disclose information about their beneficial owners to the federal government, specifically to the Financial Crimes Enforcement Network (FinCEN), a bureau of the U.S. Department of the Treasury. FinCEN will utilize this data to establish and uphold a national registry, granting authorized users, including law enforcement agencies and certain financial institutions, access to the identities of individuals who possess direct or indirect ownership or control over a company.

Corporate Transparency Act: Key Provisions

Beneficial Ownership Disclosure

The Corporate Transparency Act mandates that corporations, limited liability companies (LLCs), and certain other types of legal entities (domestic and foreign) report detailed information about their beneficial owners, defined as individuals who directly or indirectly control 25% or more of the entity’s ownership interests or have substantial ability to control business decisions.

Company Applicant Disclosure

Each company that is required to file a Beneficial Ownership Information Report (BOIR) and was established in 2024 or later will need to report the individuals who i) directly submitted the document responsible for establishing or initially registering the reporting company and/or (ii) were chiefly accountable for guiding or managing the submission of the legal document. No more than two company applicants are to be reported.

Update Requirements

Entities covered by the Corporate Transparency Act must provide information such as the names, addresses, birthdates, unique identification numbers (e.g., driver’s license or passport numbers), and images of identification documents of their beneficial owners and control persons. Whenever any of this information changes, the entity has 30 days to submit the new information to FinCEN.

Enhanced Enforcement

The CTA imposes substantial penalties for non-compliance  and willful provision of false information. Entities that fail to report accurate beneficial ownership information may face significant criminal and civil penalties.

Regulatory Guidance

Subsequent to enactment of the Corporate Transparency Act, FinCEN has issued a series of interpretive regulations to establish the specifics of how the beneficial ownership reporting regime will be administered, and how key provisions will be interpreted. Such regulatory interpretation has included interpretation and guidance on what entities are subject to reporting, what beneficial owners and control persons must be reported, and what data fields and documentation will be required.

Non-Compliance

what is the corporate transparency act - secure compliance

Failing to comply with the requirements can be very severe. It can be up to $10,000 in fines or up to 2 years of imprisonment. 

Are You Prepared to File?

The Corporate Transparency Act represents a significant milestone in the effort to enhance corporate transparency and combat financial crime in the United States. Understanding this new Act and its components is essential for all businesses and their advisors, so as to maintain compliance with this important legislation. Get educated about this topic, and make sure you have a game plan for your reporting requirements in 2024!

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