Is BOI Reporting Already Dead?
A federal judge has ruled that the Corporate Transparency Act (CTA) and its beneficial ownership reporting requirement are unconstitutional, but only for the National Small Business Association (NSBA) and its 60,000+ members as of March 1, 2024. The ruling however, has the potential to have nationwide consequences as other court cases may now arise as a result. The ruling is now prompting the question of whether BOI reporting will soon be dead in the water. But how should practitioners respond?
This ruling affects approximately 0.1-0.2% of the over 30 million businesses that the Financial Crimes Enforcement Network (FinCEN) estimates will be required to file beneficial ownership information (BOI) reports in 2024. The Treasury Department is expected to appeal the decision and request a stay of judgment while the appeal is processing.
If the stay is granted, the CTA enforcement against the NSBA and its members would resume. The case is likely to end up in the U.S. Supreme Court raising questions about the future impact of requirements to small business owners.
Small businesses who are required to file should continue to meet compliance requirements while waiting for official court decisions. Businesses that fail to file on time are risking significant civil fines, interest, penalties, and possible criminal penalties if the Treasury prevails in the appeals process. Filing provides peace of mind and ensures compliance, even if it means potentially losing filing fees and advisor costs.
Practitioners should expect an increase in client inquiries about the CTA and BOI reporting due to the increased media coverage following the ruling. Many clients were unaware of the new filing requirements despite announcements at the end of 2023 and may be prompted to ask more questions following the recent publicity. Practitioners should be prepared to issue separate engagement letters with specific language when providing BOI compliance services to ensure professional insurance coverage requirements are met.
It’s recommended that practitioners continue to monitor the appeals process, any additional regulatory guidance, and potential congressional action closely. While congressional action is unlikely given other priorities and the election year, the increased attention on the CTA and BOI reporting could lead to a groundswell of pressure on Congress and/or the Treasury to take action.
Practitioners need to be prepared to advise clients on the potential impacts and risks associated with the ruling and provide guidance on compliance while protecting themselves with appropriate engagement letters and insurance coverage.
Christine Gervais
Christine Gervais is a licensed CPA, using her skills to help businesses grow and achieve their fullest potential. Christine has a Master’s degree in accounting from Southern New Hampshire University in addition to holding her CPA license for over a decade. Notably, Christine is a nationally recognized speaker providing education to other CPAs on how to best serve clients as well as instruction on a wide variety of topics for business owners on how to maximize success. Christine prides herself on the value she can bring to clients with her extensive tax knowledge and providing strategic, forward-thinking financial strategies to help clients grow. When not behind her desk, you can find Christine spending quality time with her daughter and stepson or tending to the family’s excessively loved farm animals.