Rulings on the new FinCEN beneficial ownership information reporting requirements have been nothing short of dizzying in recent weeks, leaving many small business owners scratching their heads and wondering what will come next.
Under the Corporate Transparency Act, most American business owners were to become subject to a Jan. 1 deadline for submitting their initial BOI reports. The picture has now become significantly more uncertain for reporting companies. The current status is that a Fifth Circuit merits panel has reversed a motions panel’s order that would have reinstated the reporting obligations. The injunction, then, remains in place.
Reporting companies should pay close attention to the developing situation. While FinCEN did signal that it would extend applicable deadlines should the reporting obligations be reinstated, it’s unlikely that any extension would be significant given that the initial extension was only 13 days.
Fifth Circuit Back-and-Forth
On Dec. 3, the U.S. District Court for the Eastern District of Texas issued a nationwide injunction to prevent enforcement of the BOI reporting rules. In Texas Top Cop Shop, Inc., et al. v. Garland, et al, the court enjoined enforcement of the Corporate Transparency Act entirely, stating that the legislation itself is likely unconstitutional, so should not be enforced pending a full review and decision on the merits.
Shortly after, FinCEN announced that it would not issue penalties for failure to comply with the reporting obligation but encouraged reporting companies to voluntarily submit their reports.
On Dec. 23, a Fifth Circuit Court of Appeals motions panel lifted the injunction to reinstate the reporting obligations while the government’s appeal was considered. In response, FinCEN announced that businesses that would otherwise be required to comply by Jan. 1 would have until Jan. 13 to file their reports.
