The Beneficial Ownership Information (BOI) filing requirement, which mandates the reporting of ownership information by many U.S. based companies, has stirred significant debate and garnered substantial attention in recent months. The BOI filing requirement is a part of U.S. anti-money laundering efforts, primarily aimed at increasing transparency around who truly owns and controls certain entities. In this article, we’ll dive into what BOI is, the recent legal challenges questioning its constitutionality, deadlines and penalties associated with it, and a unique extension granted to businesses in Central Florida due to Hurricane Milton.
Understanding BOI and Its Filing Requirements
The BOI filing is part of the Corporate Transparency Act (CTA) enforced by the Financial Crimes Enforcement Network (FinCEN), a bureau within the U.S. Department of the Treasury. FinCEN requires certain businesses to file BOI in order to create a comprehensive registry of entities and their owners, intending to counter money laundering, terrorism financing, and other illegal financial activities.
The requirement applies to most limited liability companies, corporations, and other similar entities, with specific exemptions for certain entities, such as large companies with a substantial U.S. operational presence. The filing generally asks for basic yet crucial information, including:
- Full legal name, date of birth, address, and identification number of each beneficial owner.
- Information regarding the primary individual with substantial control over the entity.
The responsibility for compliance rests on new and existing companies. Entities formed prior to 2024 have a deadline to file by January 1, 2025, entities formed in 2024 have 90 days from formation to file, while those formed after 2024 have a tighter deadline, and are required to file within 30 days of formation.
Penalties for Failure to File
This is the part that is freaking some people out. Failure to comply with the BOI filing requirement can lead to severe penalties. FinCEN has established civil and criminal penalties for those who fail to file accurate information in a timely manner. For civil penalties, fines can reach up to $500 per day for every day of non-compliance, with potential criminal penalties including fines up to $10,000 and imprisonment for up to two years for a “willful” violation of the reporting requirement. Inflation adjustments will increase these penalties.
Some question how likely penalties are to be handed down, especially in light of how bad the government has been in getting word of this requirement out to the entities that need to file. Still, those penalties are enough to grab your attention once you’ve heard about them.
Legal Challenge: District Court Decision on BOI’s Constitutionality
In a recent twist, a U.S. District Court in March of this year declared that the BOI filing requirement is unconstitutional. The government made several arguments regarding the powers of Congress to enact the law, through its foreign affairs and national security powers, the Commerce Clause, and its taxing power combined with the Necessary and Proper Clause, and the court struck the government down across the board. While this ruling casts doubt over the future enforcement of the BOI, the government has appealed the decision. Until a final appellate decision is reached, FinCEN has made it clear that the filing requirements will remain in effect for all who were not parties to the case, meaning that businesses still have a legal obligation to file despite this court case and its appeal.
As a result, all entities formed before 2024 must proceed with the filing by the January 1, 2025, deadline unless further action from the courts or legislative adjustments intervene before that date.
Hurricane Milton Relief Extension for Central Florida Residents
For businesses in Central Florida, however, there is a temporary reprieve. Following the devastating impact of Hurricane Milton, the government has provided a six-month extension for affected businesses, moving the filing deadline from January 1, 2025, to July 1, 2025. This relief measure allows additional time for Central Florida entities to complete their filings, acknowledging the challenges faced by businesses in the aftermath of the natural disaster.
Interestingly, while other storms also created extensions for other parts of the country, they don’t apply to the January 1, 2025 filing date. For example, those affected by Hurricane Helene, received an extension for the BOI filing if the filing deadline falls between September 22, 2024 and December 21, 2024. Useful for newer entities, but not for those that existed prior to 2024. So, sorry North Carolina, Georgia, and others, but it’s really just Central Florida that gets the good extension here.
Taking a “Wait and See” Approach?
For businesses located in Central Florida, this extension allows for a cautious approach in the face of ongoing legal battles over BOI requirements. The six-month grace period provides affected entities the opportunity to monitor any developments in the appellate courts regarding the constitutionality of the BOI filing. However, businesses outside of Central Florida must comply with the January 1, 2025 deadline, as the other announced extensions do not seem to cover that date for other locations.
Conclusion
The BOI filing requirement is currently a live mandate for U.S. businesses, despite the ongoing court appeals and recent legal challenges to its constitutionality. The next few months will be critical as businesses await the appellate court’s final ruling, which could either uphold or invalidate the filing requirements. For now, Central Florida businesses have the benefit of an extended deadline due to Hurricane Milton, giving them a practical reason to delay filing until July 1, 2025, in hopes of a judicial resolution on the matter. Nevertheless, businesses should stay informed and consult legal or tax professionals to ensure compliance with any upcoming BOI obligations.
