The U.S. Treasury Department has announced a deadline extension for millions of small businesses to file a new form called the Beneficial Ownership Information report. The original deadline of January 1, 2025, has been pushed back to January 13, 2025. This extension comes in response to legal challenges to the new reporting requirement under the Corporate Transparency Act.
The Beneficial Ownership Information report must be filed with the Financial Crimes Enforcement Network (FinCEN) and applies to approximately 32.6 million businesses, including certain corporations, limited liability companies, and others. Failure to comply with the filing requirement could result in fines exceeding $10,000.
Businesses and owners who do not comply with the reporting mandate may face civil penalties of up to $591 per day, adjusted for inflation. Additionally, they could be subject to criminal fines of up to $10,000 and up to two years in prison. However, certain small businesses are exempt from the requirement, such as those with over $5 million in gross sales and more than 20 full-time employees.
The decision to delay the compliance deadline was made following a recent court ruling. A federal court in Texas had issued a nationwide preliminary injunction on December 3, temporarily blocking FinCEN from enforcing the rule. However, the 5th U.S. Circuit Court of Appeals overturned the injunction on Monday.
According to the FinCEN website, the deadline extension was granted to allow reporting companies additional time to comply due to the period during which the preliminary injunction was in effect. While the number of businesses that have filed a Beneficial Ownership Information report to date is unknown, data suggests that few have done so.
The federal government had received approximately 9.5 million filings as of December 1, which is only about 30% of the estimated total. Some experts believe that many non-exempt reporting companies have not filed their initial reports because they are unaware of the requirement.
Despite the potential for financial penalties for noncompliance, it is unlikely that FinCEN will impose such penalties except in cases of bad faith or intentional violations. The agency’s primary focus at this time is on educating the public about the reporting requirement rather than taking enforcement actions against noncompliant companies.
Certain businesses are exempt from the Beneficial Ownership Information filing requirement, including large companies, banks, credit unions, tax-exempt entities, and public utilities. The filing is not an annual requirement, and businesses only need to resubmit the form to update or correct information. Different compliance deadlines apply depending on when a business was formed.
Overall, there may be additional court rulings that could impact reporting requirements in the future. Litigation is ongoing in the 5th Circuit, and it remains to be seen how the constitutionality of the Corporate Transparency Act will be determined. As the legal landscape evolves, businesses should stay informed about any changes that may affect their reporting obligations.
