House Passes Bill To Delay Beneficial Ownership Information (BOI) Reporting Deadline
A bill that could offer a reprieve for businesses seeking certainty on beneficial ownership information (BOI) reporting requirements is quietly making its way through Congress.
getty
A bill that could offer a reprieve for businesses seeking certainty on beneficial ownership information (BOI) reporting requirements is quietly making its way through Congress.
On February 10, the House unanimously passed H.R. 736, the Protect Small Business from Excessive Paperwork Act. The bill would postpone the BOI reporting deadline for one year for most companies (those reporting companies formed or registered before January 1, 2024). Under the bill, the new reporting deadline would be January 1, 2026.
About The Bill
The bill, introduced by Rep. Zachary Nunn (R-Iowa), was introduced on January 24, 2025. It now has 12 co-sponsors, but it started with three: Rep. Sharice Davids (D-Kan.), Rep. Tom Emmer (R-Minn.), and Rep. Donald G. Davis (D-N.C.).
The bill moved quickly through the House, resulting in 40 minutes of debate Monday before the roll call. The vote was 408-10. Twenty-five House members—11 Republicans and 14 Democrats—did not vote. (You can see how your Representative voted here.)
H.R. 736 is intended to alleviate the chaos that has marked the implementation of the Corporate Transparency Act (CTA).
Corporate Transparency Act Background
The CTA was passed in 2021 as part of the National Defense Authorization Act for Fiscal Year 2021 (if you’ve seen references to 2020, it’s because the law was introduced in 2020 as part of the Anti-Money Laundering Act but was eventually rolled into the CTA and passed in 2021).
The law requires certain companies to file reports identifying a company’s beneficial owners with the Financial Crimes Enforcement Network—called FinCEN.
The CTA was passed to combat illegal activities, including tax fraud, money laundering, and financing for terrorism. The idea is that requiring businesses to disclose their ownership makes it harder for criminals and other bad actors to hide behind shell companies and complicated business structures.
For purposes of the CTA, reporting companies can be domestic companies created under the laws of a state or Indian tribe or entities formed under the law of a foreign country registered to do business in any state or tribal jurisdiction. This can include limited partnerships, limited liability partnerships (LLPs), business trusts, LLCs (including SMLLCs), and corporations—typically, any entity you would register with the state.
Some companies—23 different kinds—are exempt from reporting. These generally include entities that are already required to register their ownership with the federal government, such as public companies and tax-exempt entities.
(You can find out more about who may need to report here.)
The Department of the Treasury officially began accepting beneficial ownership information (BOI) reports on January 1, 2024, but the rollout was marked with considerable confusion and opposition. Last summer, a Corporation Service Company (CSC) survey of 200 general counsels, corporate secretaries, and other senior in-house legal and compliance executives from across a broad range of industries in the U.S., Continental Europe, the U.K., and APAC, found that the overwhelming majority (83%) were concerned about their own organization’s compliance with the CTC. Over three quarters (76%) believed the CTA is more broadly causing concern among U.S. businesses. Just 1% of those surveyed had no concerns about their organization’s CTA compliance.
Court Cases
Much of the confusion about the CTA can be traced to a series of court cases challenging whether the law was constitutional.
Months after the CTA was enacted, a federal court found it unconstitutional. The ruling resulted from a lawsuit filed by the National Small Business United (also known as the National Small Business Association, or NSBA) and Isaac Winkles. On March 1, 2024, U.S. District Judge Liles C. Burke of the Northern District of Alabama, Northeastern Division, found the CTA unconstitutional. In his opinion, Burke wrote, “Congress sometimes enacts smart laws that violate the Constitution.” This case, he continued, “illustrates that principle.” The government immediately appealed the ruling to the Eleventh Circuit, and oral arguments were heard in October 2024.
A ruling in Community Associations Institute v. Yellen yielded a different result. In that case, the Court denied the plaintiffs’ motion for a preliminary injunction, finding that the plaintiffs failed to show, among other things, a likelihood of success on the merits. On November 4, 2024, the plaintiffs filed a notice of appeal to the U.S. Court of Appeals for the Fourth Circuit.
Another court ruling denied a motion for a preliminary injunction in a lawsuit challenging the CTA. In that case, Firestone v. Yellen, filed in Oregon, the Court rejected a motion for a preliminary injunction, finding that the plaintiffs failed to show a likelihood of success on the merits of their claims that the CTA was unconstitutional. On November 18, 2024, the plaintiffs appealed to the U.S. Court of Appeals for the Ninth Circuit.
The cases that really shook things up were filed in the Fifth Circuit—including one that made it to the Supreme Court.
In that case, Texas Top Cop Shop, Inc., et al. v. Garland, et al., U.S. District Court Judge Mazzant from the Eastern District of Texas granted the request of the National Federation of Independent Business (NFIB) for a preliminary injunction. Because NFIB and its nearly 300,000 members were a party to this case, the judge blocked enforcement of the BOI reporting requirements nationwide.
On December 17, on appeal, Mazzant ruled that a nationwide preliminary injunction barring FinCEN from enforcing the CTA would stand. The government then appealed the matter to the Fifth Circuit, which initially granted the government’s request to stay the injunction. Days later, however, a separate Fifth Circuit panel vacated the stay, blocking enforcement. That meant the ruling that stayed the injunction no longer applied, and the injunction was back in play.
On December 31, 2024, the Department of Justice filed an application with the Supreme Court to put the brakes on the Texas Top Shop nationwide preliminary injunction. Specifically, the government applied for a stay of the injunction.
(A stay is a court order that stops a legal proceeding—it’s usually temporary.)
The Supreme Court agreed, granting the stay and halting the Fifth Circuit’s injunction. That injunction should have stopped the government from enforcing the CTA.
But there was a wrinkle: On January 7, 2025, a U.S. District Judge in Texas granted a preliminary injunction and stay that would prohibit FinCEN from enforcing the new law. In that case, Smith v. U.S., Judge Jeremy D. Kernodle found that the plaintiffs “have demonstrated that the CTA and its implementing rule are likely unconstitutional, that they face a substantial risk of irreparable harm absent an injunction, and that the balance of equities and public interest support preliminary relief.” As a result, the court enjoined the government from enforcing the CTA against the plaintiffs and their related entities while the lawsuit continued.
The ruling, however, was bigger than that—the injunction purports to apply nationwide. In Smith, the plaintiffs moved for a stay (there’s that word again) of the reporting rule. Kernodle granted that motion, temporarily stopping the effective date of the reporting rules while the lawsuit is pending.
Recent Appeal
Most recently, on February 5, 2025, the Department of Justice filed an appeal in Smith. The government also asked for a stay of the injunction while the matter is pending. The majority of the appeal involves the same arguments that won the day at the Supreme Court, and the government noted this, writing, “The same result is warranted here.”
As part of its motion, the government noted that if the stay were granted, FinCEN intended to extend the compliance deadline. The government also noted in its filing that during the 30 days, “FinCEN will assess whether it is appropriate to modify the CTA’s reporting requirements…”
It is unclear what changes might be in store. However, a Treasury official noted that the agency would, during the 30 days, “assess its options to modify further deadlines or reporting requirements for lower-risk entities, including many U.S. small businesses, while prioritizing reporting for those entities that pose the most significant national security risks.”
For now, nothing has changed for businesses, and reporting remains voluntary.
Other Bills
Last year, Senate Bill 4297 and its companion bill, H.R. 8147, both titled the Repealing Big Brother Overreach Act, were introduced in Congress. Both purported to repeal the CTA, but neither bill made it out of committee.
Last month, H.R. 425, also known as the Repealing Big Brother Overreach Act, was introduced in the House. On January 15, 2025, it was referred to the House Committee on Financial Services, where it has remained since.
It appears that an extension—not a repeal—may be the path forward in Congress (at least for now).
Source link
