Treasury gives small businesses extra time to avoid fines
- The 5th U.S. Circuit Court of Appeals issued a court order halting enforcement of the Beneficial Ownership Information report requirements.
- Small businesses have until January 13, 2025, to comply, and are currently exempt from liability during the injunction period.
- The Treasury Department's extension reflects the need for further public education on the new reporting requirements.
In the United States, the Treasury Department announced a delay in the deadline for small businesses to submit their Beneficial Ownership Information (BOI) reports. Originally set for January 1, 2025, the new deadline has been pushed to January 13, 2025, due to a court order issued by the 5th U.S. Circuit Court of Appeals. This court ruling came in response to legal challenges regarding the constitutionality of the Corporate Transparency Act, which established the BOI reporting requirement. As a result of the injunction, businesses are currently not required to file these reports while the legal proceedings continue, preventing potential civil penalties of up to $591 per day for noncompliance. The initial requirement mandated that millions of small businesses report their beneficial ownership information or risk facing significant fines, including civil penalties and possible criminal charges. However, many small businesses are exempt from this requirement, particularly those with annual gross sales above $5 million or those employing more than 20 full-time staff members. The Treasury Department's decision to delay the deadline acknowledges the challenges these reporting companies face, especially considering the period when the preliminary injunction had been in effect prior to the court's ruling. Historically, there has been a low compliance rate with the reporting requirements created by the Corporate Transparency Act, as only approximately 9.5 million filings were recorded by the federal government as of December 1, 2024. This highlights the need for further public education about regulatory obligations. The Treasury Department and FinCEN, the Financial Crimes Enforcement Network, are trying to ensure that they guide businesses rather than imposing penalties in cases of minor infractions. This approach is likely to encourage voluntary compliance while also recognizing the complexities involved in the new regulations. Looking ahead, the issue remains fluid, as the 5th Circuit has not yet ruled on the constitutionality of the Corporate Transparency Act, with a key oral argument scheduled for March 25, 2025. Businesses need to stay informed about upcoming developments as they could significantly impact compliance requirements and reporting procedures moving forward. The anticipated court decisions may prompt additional changes in the initial expectations of businesses and regulatory authorities alike.