01/08/25

The Treasury Department’s enforcement of the Beneficial Ownership Information (BOI) reporting requirement for millions of small businesses has been delayed once again, following a court order suspending the rule’s implementation. A recent series of legal maneuvers has left small business owners grappling with uncertainty. On December 3, a federal court in Texas issued a temporary block on the Treasury’s enforcement of the BOI reporting rules, which were initially set to take effect on January 1, 2025. However, on December 23, a motions panel from the 5th Circuit lifted the injunction after the federal government’s appeal. Just three days later, a different panel from the same court reinstated the injunction. The court’s decision temporarily halts enforcement of the rule while it reviews the “weighty substantive arguments” concerning the constitutionality of the Corporate Transparency Act, which underpins the reporting requirement. The deadline, previously set for January 13, is now uncertain. It is unclear when the temporary injunction will expire however, the legal challenge is scheduled for oral argument on March 25, 2025, so OBL anticipates the injunction will remain effective at least through March. For now, businesses are not required to file beneficial ownership information (BOI) reports with FinCEN. Furthermore, FinCEN clarified on its website that businesses face no liability for failing to submit BOI reports during the injunction.

 Key Implications for Banks and Their Clients

For banks, this development introduces both opportunities and challenges in advising clients:

1. Temporary Compliance Relief
• Businesses that have not yet submitted their initial BOI reports are no longer required to do so while the order remains in effect.
• Companies that have already filed are not obligated to update or correct previously submitted information.
• No enforcement actions can be taken against businesses that fail to comply during this period.
2. Legal Uncertainty
• The injunction could be lifted or modified as the court continues to review the case, emphasizing the need for clients to stay informed.
• The judge deemed the CTA unconstitutional and noted the plaintiffs, including the National Federation of Independent Business (NFIB), had a strong likelihood of success. However, this ruling does not impact a separate case under review by the Eleventh Circuit involving another trade group, National Small Business United.
3. Customer Due Diligence (CDD) Still Required
• It’s crucial to clarify to clients that banks’ obligations under the CDD rule remain unaffected by this decision. The CDD rule is distinct from FinCEN’s BOI reporting rule and still requires banks to collect and verify beneficial ownership information as part of their ongoing compliance responsibilities. FinCEN has issued a notice to assist financial institution customers in understanding this distinction.
  
  

Supporting Clients Through the Uncertainty

Bankers play a pivotal role in helping clients navigate this regulatory pause. It is crucial to help businesses understand that while reporting is currently on hold, they should remain prepared for possible reinstatement of the rule. Ensure clients understand why banks continue to collect beneficial ownership information under the CDD rule, even as the BOI reporting rule is suspended. This injunction offers temporary relief but underscores the complexity of the regulatory environment. By staying proactive and transparent, banks can reinforce their value as trusted advisors while supporting clients during this period of uncertainty.