BOI reporting remains voluntary, for now

By Dan Mayo, JD, LLM, Partner & Lead, National Tax Services, Withum

On January 23, 2025, in a dizzying turn of events, the Supreme Court in Texas Top Cop Shop reinstated the government’s power to enforce the Corporate Transparency Act (CTA), overturning a previous block by the Fifth Circuit Court of Appeals. That is not the end of the story, however, because there is a separate nationwide injunction on the CTA from the Smith case that remains in effect.

Background
The CTA, enacted in 2021, aims to combat financial crimes by requiring companies to report certain information about their beneficial owners to the federal government. This is known as beneficial ownership information (BOI) reporting and it is administered by the Financial Crimes Enforcement Network (FinCEN), a division of the U.S. Treasury Department. Reporting to FinCEN began on January 1, 2024, and the original deadline for all reporting entities created before 2024 to report to FinCEN was December 31, 2024.

The Ongoing Saga
The CTA faced immediate opposition from business groups, leading to many legal battles. It all came to a head on December 3, 2024, when a U.S. District Court in Texas Top Cop Shop imposed a nationwide preliminary injunction on BOI reporting. FinCEN followed up a few days later with a confirmation on its website that reporting under the CTA was not required (i.e., it is voluntary). Then, on December 23, 2024, the Fifth Circuit Court of Appeals stayed the injunction, and FinCEN announced on its website that reporting was on again. FinCEN also extended the reporting deadline from December 31, 2024, to January 13, 2025.

However, on December 26, 2024, a different panel of the Fifth Circuit Court of Appeals vacated the prior Fifth Circuit ruling and reinstated the nationwide preliminary injunction so that BOI reporting was off again. The next day, FinCEN confirmed that reporting was voluntary. Most recently, on January 23, 2025, the U.S. Supreme Court weighed in to lift the injunction and reinstate FinCEN's power to enforce BOI reporting.

You might be tempted to think the Supreme Court ruling would be dispositive, but that is not the case. There is a separate nationwide injunction from the Smith case that remains in effect, and the Supreme Court’s decision in Texas Top Cop Shop has no impact on that injunction. Thus, unless and until an appellate court lifts the nationwide injunction in the Smith case, BOI reporting is off again.  

In the words of FinCEN, “reporting companies are not currently required to file beneficial ownership information with FinCEN and are not subject to liability if they fail to do so while the order remains in force. However, reporting companies may continue to voluntarily submit beneficial ownership information reports.”

As the legal battles continue, companies are not currently required to comply with the CTAs reporting mandates, at least for the time being. It remains to be seen whether an appeals court lifts the Smith injunction, but the Trump Administration, at least for now, has continued to support appeals in this area. Congress also entered the fray on February 11, 2025, when the House unanimously passed a bill, H.R. 736, Protect Small Businesses from Excessive Paperwork Act of 2025, that would extend the reporting deadline to January 1, 2026 for entities that were created before 2024. A companion bill was introduced in the Senate by Tim Scott, the chairman of the Senate Banking Committee. Both bills would delay reporting for reporting companies created before 2024, and would not affect reporting deadlines for entities created after 2023.

So what should businesses do?
There is no one answer that works for all businesses. Businesses have the option to file now or to wait for further legal developments, and there is no harm in filing now other than the time and cost of filing and the sharing of information with FinCEN. If a business finds any of those things objectionable, then it can wait until the courts provide more clarity – if that’s even possible.