WASHINGTON — The legal arguments surrounding the Beneficial Ownership Information (BOI) reporting requirements continue to move forward, but small-business owners, including most dry cleaners, still are not required to file despite the U.S. Supreme Court’s recent intervention.
On Jan. 23, the Supreme Court lifted a nationwide injunction in the Texas Top Cop Shop v. Garland case that had blocked the enforcement of BOI reporting requirements. However, a separate nationwide injunction from a different Texas federal judge in Smith v. U.S. Department of the Treasury remains in effect, keeping the reporting requirements voluntary for now.
The Corporate Transparency Act (CTA), passed in January 2021, requires most companies, including dry cleaners, to file ownership information with the Financial Crimes Enforcement Network (FinCEN). Reports would be mandatory for anyone exercising substantial control or owning at least 25% of a reporting company. The law aims to prevent illicit activities such as money laundering and drug trafficking through shell companies.
“Today’s (Supreme Court) decision is a setback for small business,” says Beth Milito, vice president and executive director of the National Federation of Independent Business (NFIB) Small Business Legal Center. “Hopefully, Treasury recognizes the chaos that will ensue by requiring 32 million small businesses to imminently file their BOI information while the constitutionality of the reporting requirements is determined.”
Milan Solarz-Patel, head of BOI Compliance at FinCEN Guidance and former IRS attorney, describes the situation as a “legal merry-go-round,” noting that “one nationwide injunction is lifted only to have another take its place.” However, Solarz-Patel suggests that the CTA’s future looks secure, stating that its “bipartisan origins and necessity for international AML (Anti-Money Laundering) efforts make it highly likely that the law will ultimately be found constitutional.”
The reporting requirements, if implemented, will mandate companies to provide information about their beneficial owners, including legal names, birthdates, residential addresses and identification documentation.
While FinCEN has yet to announce a new deadline for BOI reporting, the agency confirms that companies can continue to submit their information voluntarily.
Solarz-Patel says that “these lower court injunctions have temporarily impacted BOI reporting but do not address the core constitutional issues. Ultimately, this legal battle will likely end up back at the Supreme Court.”
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