U.S. Treasury Secretary Janet Yellen tours the Financial Crimes Enforcement Network (FinCEN) in Vienna, Virginia, on January 8, 2024.
Valerie Plesch/Bloomberg via Getty Images
The U.S. Treasury has extended the deadline for millions of small businesses to file a new form known as the Beneficial Ownership Information Report to January 13, 2025.
The Treasury Department originally asked many companies to submit reports to the agency’s Financial Crimes Enforcement Network (FinCEN) by January 1. Violations can result in fines that can exceed $10,000.
The delay comes as a result of a legal challenge to new reporting requirements under the Corporate Transparency Act.
According to federal estimates, the rule applies to about 32.6 million businesses, including certain corporations and limited liability companies.
FinCEN said businesses and operators who fail to comply could be subject to civil penalties of up to $591 per day, adjusted for inflation. He also faces a criminal fine of up to $10,000 and up to two years in prison.
However, many small businesses are exempt. For example, businesses with more than $5 million in gross sales and more than 20 full-time employees may not be required to file a report.
Why did the Ministry of Finance delay the BOI reporting requirement?
The Treasury Department extended the compliance deadline following a recent court ruling.
On December 3, a federal court in Texas issued a nationwide preliminary injunction temporarily blocking FinCEN from enforcing the rules. However, the 5th U.S. Circuit Court of Appeals reversed that injunction on Monday.
According to FinCEN’s website, “Given how long the preliminary injunction has been in effect, Treasury recognizes that reporting companies may need additional time to comply, so reporting “The deadline has been extended.”
FinCEN did not respond to CNBC’s request for comment on the number of companies that have filed BOI reports to date.
But some data suggests that few do.
The federal government received about 9.5 million applications as of Dec. 1, according to statistics provided by FinCEN to the office of Rep. French Hill, R-Ark. This number represents approximately 30% of the total estimate.
Mr. Hill called for the repeal of the Corporate Transparency Act (passed in 2021), which created the BOI requirement. Hill’s office provided the data to CNBC.
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“Most non-exempt reporting companies have not filed an initial report, likely because they are unaware of the requirements,” Daniel Stipano, a partner at the law firm Davis Polk & Wardwell, said in an email. “Deaf,” he wrote.
On the silver lining for companies, Stipano said it is “unlikely” that FinCEN will impose financial penalties “except in cases of malicious or intentional violations.”
“FinCEN has made clear in its public statements that its primary objective at this time is not to take enforcement action against non-compliant companies, but to educate the public about this requirement,” he said. said.
Certain companies are exempted from applying for BOI
Filing to the BOI is not an annual requirement. Businesses can simply resubmit the form to update or correct information.
Many tax-exempt entities already provide similar data, including large corporations, banks, credit unions, tax-exempt entities, and utilities.
A company’s compliance deadlines vary depending on when it was established.
For example, companies created or registered before 2024 must submit their first BOI report by January 13, 2025, according to FinCEN. If you do so after January 1, 2025, you must submit your report within 30 days.
Stipano said additional court decisions are likely that could impact coverage.
For example, a lawsuit is underway in the Fifth Circuit, but there has yet to be a formal ruling on the constitutionality of the Corporate Transparency Act.
“Lawsuits challenging the law have been filed in multiple jurisdictions, and these cases could ultimately reach the Supreme Court,” he said. “At this point, it is unclear whether the incoming Trump administration will continue to support the government’s position in these cases.”
