The CTA, FinCEN, & The BOIR

By Adam Doll

Apologies in advance for an article that some may find BOIR-ing (the dad jokes are getting worse as I age), but if you are a business owner, pay attention. Let’s get into it.

The Corporate Transparency Act (“CTA”) was passed by Congress on December 11, 2020, and became effective January 1, 2024. The bill’s stated purpose is to combat illegal activity including tax fraud, money laundering, and financing terrorism. Transparency…GOOD. Fraud, money laundering, and terrorism…BAD. Good law, right? Not so fast.

The CTA requires many small businesses (with certain exceptions) to file a Beneficial Ownership Information Report (“BOIR”) with the Financial Crimes Enforcement Network (“FinCEN”). The BOIR must report the company name, address, jurisdiction of formation, and employer identification number.

The CTA is enforced* by FinCEN and requires companies to submit the initial BOIR no later than January 1, 2025, for companies existing prior to January 1, 2024, and all new companies formed after January 1, 2024 to submit within 90 days of formation. For companies formed after January 1, 2025 the deadline is 30 days after formation.

If your company was formed on or after January 1, 2024, your company will need to provide information for each of its applicants (name, address, and an identifying number from an identifying document such as a driver’s license or passport). Applicants are defined as people who filed the document that created the company or were primarily responsible for directing the filing.

Companies need to provide the names, birthdays, addresses, and an identifying number from an identification document, along with a photo of the document itself for each of their beneficial owners. Beneficial owners are defined as people who have substantial control over a company or people who own a minimum of 25% of the company.

Penalties for not reporting or reporting false or incomplete information are criminal fines of up to $10,000 and two years in jail, and civil penalties up to $500 per/day.

*However, a federal judge in Texas recently issued a preliminary injunction blocking enforcement of the law. The lawsuit challenged the constitutionality of the CTA, arguing that the CTA exceeded Congress’s authority to regulate interstate commerce and that it violates the First and Fourth Amendments. This injunction only temporarily blocks the enforcement of the CTA, and it can be removed or modified at any time. Because of the temporary nature of the injunction, if you’re not going to file a BOIR, we strongly encourage you to monitor legal developments closely. Alternatively, you can still file a BOIR if you choose.