REMINDER – ALL “REPORTING COMPANIES” MUST FILE THEIR INITIAL BENEFICIAL OWNERSHIP INFORMATION REPORTS BY DECEMBER 31, 2024.
This update follows our previous news post on the Corporate Transparency Act (“CTA”) requirements, which can be found here – https://www.cameronmcevoy.com/news/important-new-federal-reporting-requirements-of-entity-ownership/.
The CTA’s current regulations are expansive and, at times, vague in terms of specific reporting obligations. The broad language has led to confusion about which entities must report, what information needs to be disclosed, and the frequency of such reports. This ambiguity, coupled with the harsh penalties for non-compliance, highlights the critical need to adhere to the regulations as best as possible until further clarity is gained.
Therefore, we continue to urge that all Reporting Companies file their initial BOI reports prior to December 31, 2024 (and updating as needed) in order to avoid the extensive penalties associated with non-compliance.
Updates to Recent Litigation surrounding the CTA:
Several lawsuits are currently pending in federal district courts challenging the extent of FinCEN’s authority to enforce these CTA rules and the sufficiency of FinCEN’s guidance in ensuring compliance. Plaintiffs are arguing that the CTA’s reporting requirements violate constitutional rights and imposes undue hardship on smaller businesses.
For example, in National Small Business United v. Yellen, the United States District Court for the Northern District of Alabama ruled in March that the CTA is an unconstitutional abuse of power. That case has since been appealed to the United States Court of Appeals for the Eleventh Circuit. That appeal has not yet been resolved, as oral arguments were only recently held.
Several other similar lawsuits in other jurisdictions are still in their initial stages of litigation. It is highly unlikely that any of these cases will be resolved prior to FinCEN’s initial 12/31/24 reporting deadlines.
FinCEN has released a statement that it intends to continue implementing the CTA for all reporting companies not involved in such litigation – https://www.fincen.gov/news/news-releases/updated-notice-regarding-national-small-business-united-v-yellen-no-522-cv-01448.
Considering all of this, we continue to recommend that all reporting companies continue to timely and accurately file BOI reports well in advance of 12/31/24.
Should you require assistance, please do not hesitate to contact us. We are here to help navigate the evolving regulatory landscape and ensure your continued compliance. Because of the ambiguity, we will not be filing any BOI reports on behalf of our clients, and we are charging at our normal hourly rates in connection with any CTA BOI questions that arise. Ultimately the “reporting company” still must make sure to file its BOI report.
Who is responsible for filing and updating the BOI Report with FinCEN?
The reporting company is responsible for ensuring the timely filing and accuracy of the information provided and making sure such information is regularly updated. For example, the reporting company must update any changes to its name or principal place of business and provide updated information regarding any changes to the name or address of its beneficial owners. Other individuals may be liable for willfully failing to report complete and accurate BOI to FinCEN.
Additional Guidance:
Reporting companies should consider implementing a designated individual to ensure the reporting company’s compliance with the CTA. Additionally, reporting companies should implement procedures to ensure that it is able to collect accurate and up-to-date information regarding its beneficial owners. For example, a reporting company may wish to implement amendments to its bylaws, shareholders agreements, operating agreements, or other corporate documents (as applicable) to ensure the reporting company is able to obtain such information in compliance with the CTA.
FinCEN has been actively working to clarify the CTA regulations and has been frequently updating its FAQs (https://www.fincen.gov/boi-faqs) and Small Business Resources (https://www.fincen.gov/boi/small-business-resources). We recommend that you or your designated compliance officer regularly review these updates to stay informed of any changes or new interpretations. Staying proactive will ensure that your organization remains compliant and avoids the costly penalties that can arise from non-compliance.
Penalties:
Failure to comply with the reporting requirements under the CTA can result in significant financial penalties, including civil monetary penalties for each day a violation continues, and criminal fines can be as high as $10,000.00 along with imprisonment for up to two (2) years for willfully failing to report complete and accurate BOI to FinCEN. Such penalties may not only apply to reporting companies but may also apply to any individuals and senior officials who file BOI Reports on behalf of the reporting companies as well as beneficial owners who willfully or intentionally refuse to provide accurate information to the reporting companies. To avoid such consequences, we recommend ensuring that your organization and its beneficial owners are fully compliant with the CTA’s reporting requirements.
DISCLAIMER: The information provided above is for informational purposes only, is general in nature, and is not meant to be an exhaustive list of all reporting requirements under the CTA. It does not constitute legal advice and should not be interpreted or relied on as such. For legal advice tailored to your specific circumstance, please reach out to one of our qualified attorneys. Please be aware that Cameron McEvoy PLLC is not responsible for filing BOI reports on your behalf and will not be liable for your failure to comply with the CTA’s reporting requirements.