After a series of court decisions and reversal and then a reversal of the reversal, the rule (Beneficial Ownership Information, or BOI rule) requiring most businesses to report to FinCEN (the Financial Crimes Enforcement Network) on their ownership is currently on hold, pending a judicial opinion on whether the law containing the BOI rule is constitutional.
The BOI rule is contained in the Corporate Transparency Act (CTA). The constitutionality of the CTA is the subject of a judicial challenge. First, the Texas district court hearing the case determined that the January 1, 2025 effective date of the BOI rule could not be enforced, pending a decision on the merits of the constitutionality of the CTA. One panel of a federal appeals court reversed that nationwide injunction, and FinCEN almost immediately announced a new effective date of January 13 for submitting ownership reports. But then a different panel of that same court reversed the reversal and once again issued an injunction against enforcing the rule, pending a decision on the constitutionality of the CTA.
The Texas courts will decide on whether the CTA—including its BOI rule—is constitutional, but it is unclear how long it will take for that decision to be handed down. And of course, the initial decision will be subject to appeal—first to the Fifth Circuit Court of Appeals, and then quite likely to the U.S. Supreme Court—by the losing side of the lawsuit. Whether the injunction against enforcing the BOI rule survives the appellate process is another still-unanswerable question.
Prospects: The BOI impacts literally millions of small businesses, most of them now thoroughly confused about when and what their reporting obligations are. This issue impacts many NAIFA members’ clients, although most NAIFA members themselves may be exempt from the BOI rule under one or more of the law’s exemptions (there is one for broker-dealers and one for licensed insurance agents). This is a hot issue, with Congress also possibly willing to weigh in to at least extend the BOI effective date. There was an attempt to do that in the year-end government funding bill enacted by the 118th Congress last month, but the provision was dropped during that bill’s final negotiations. For now, enforcement of the BOI rule has been blocked by the Fifth Circuit Court of Appeals. It may or may not be revived when the court determines the constitutionality of the CTA.
NAIFA Staff Contacts: Diane Boyle – Senior Vice President – Government Relations, at dboyle@naifa.org; or Jayne Fitzgerald – Director – Government Relations, at jfitzgerald@naifa.org; or Mike Hedge – Senior Director – Government Relations, at mhedge@naifa.org.