The Chronicles Of Grant County
The Ping Ponging Of New Federal Reporting Requirements
Part Four
Players competing in a table tennis (ping pong) match are shown in a portion of a photograph of the event in Tokyo. (The photograph was produced by Cameron Smith and provided courtesy of The White House, August 24, 2021.)
[Editor's Note: I found this very confusing, so I requested a summary and details at the end of the article.]
(You may want to first read the last two paragraphs of this news column - the ones prior to the summary and details.)
Today is the anniversary of a vote taken by the United States Senate.
It's the fourth anniversary of the day that that body of the United States Congress voted to override the veto of a defense bill by President Donald Trump. The vote on January 1, 2021, to override the Presidential veto was bipartisan.
The United States House of Representatives had already voted on December 28, 2020, to override the veto of this defense bill by President Trump. The vote in that chamber was also bipartisan.
While the legislation was officially named the "William M. (Mac) Thornberry National Defense Authorization Act for Fiscal Year 2021," the bill passed by the U S Congress included several other items beyond matters dealing with the military defense of the nation.
According to a summary of the legislation provided by the U S Congress, "…the bill [the legislation] sets forth policies for and addresses additional matters related to homeland security; veterans affairs; communications; intelligence; science, space, and technology; natural resources; oversight and reform; financial services; and semiconductor production."
Those two words – "financial services" – give a hint to one of the items included in this legislation.
It's why it is the United States Department of the Treasury – not the United States Department of Defense – that is the entity of the Federal government determined to begin full enforcement of new regulations included in this "defense" law.
These new regulations require most businesses in the United States to report ownership details of their businesses as well as other aspects of their personal lives and business activities to the Federal government.
The U S Department of the Treasury has enlisted the assistance of the United States Department of Justice to force compliance with the new regulations.
Not everyone agrees with the new regulations. Some question the constitutional basis of the new regulations.
Among those that have indicated that there might be constitutional issues have been several Federal judges.
For example: During December of 2024 alone, Federal courts have issued a nationwide injunction to prohibit enforcement of the new regulations, issued an order suspending that nationwide injunction, and issued an order restoring the preliminary nationwide injunction to prohibit enforcement of the new regulations.
Owners of many American businesses may feel like they're the ping pong ball in a table tennis match.
As of today, January 1, 2025, most American businesses can choose to voluntarily comply with the new Federal regulations by submitting Beneficial Ownership Information (BOI) reports to comply with the Corporate Transparency Act (CTA). Those BOI reports can be submitted to the Financial Crimes Enforcement Network (FinCEN), a division of the U S Department of the Treasury.
"In light of a recent federal court order, reporting companies are not currently required to file beneficial ownership information with FinCEN and are not subject to liability if they fail to do so while the order remains in force," according to a statement from the U S Department of the Treasury. "However, reporting companies may continue to voluntarily submit beneficial ownership information [BOI] reports."
Please note that this situation can change again. Depending on the Federal courts and depending on the decisions of the U S Department of the Treasury.
In the meantime, businesses need to decide whether to voluntarily submit the information required by the U S Department of the Treasury or stay up-to-date – quite literally on a daily basis – to learn if the Federal courts have declared the CTA and the BOI reporting requirements unconstitutional in whole or in part or if the U S Department of the Treasury has decided to stop appealing Federal court injunctions and allow trials to proceed.
Here are details on several key aspects of the BOI reporting requirements:
As part of CTA, unless exempted, BOI reports need to be filed by corporations, limited liability companies (LLCs), and any other entities created by the filing of a document with a secretary of state or any similar office in the U S as well as entities created under the laws of a foreign country that have registered to do business in the U S by the filing of a document with a secretary of state or any similar office.
Those entities required to report are called "reporting companies."
Businesses file their BOI reports with the FinCEN.
BOI reports will provide the Federal government with detailed information about each reporting company as well as the individuals that own and/or control each reporting company. Those individuals are called "beneficial owners."
A beneficial owner, according to the FinCEN, is an individual who either directly or indirectly exercises substantial control over the reporting company or an individual who owns or controls at least 25% of the reporting company's ownership interests.
The FinCEN has specific definitions of what "substantial control" means.
Certain individuals with specific titles as well as key officials who have the ability to make management, financial, and operational decisions are among those that the FinCEN considers to have "substantial control" of reporting companies.
Not every business will be required to file a BOI report.
The FinCEN indicated that there are 23 types of entities that are exempt from the reporting requirements. A detailed list of all of the entities exempted from filing BOI reports is available on the FinCEN website, https://www.fincen.gov .
In addition to those specific entities exempted, if a business is operated as a sole proprietorship, it may also not have to file a BOI report with the FinCEN. The Federal agency detailed that a BOI filing would be required if the sole proprietorship was created or registered to do business by filing a document with a secretary of state or similar office, but if no such filing occurred, no BOI report would need to be filed.
A statement from the FinCEN specifically noted that "filing a document with a government agency to obtain (1) an IRS employer identification number, (2) a fictitious business name, or (3) a professional or occupational license does not create a new entity, and therefore does not make a sole proprietorship filing such a document a reporting company."
All BOI filings need to be done electronically through the website of the FinCEN.
Among the information required to be filed about each beneficial owner are the person's name, date of birth, and street address. In addition, an identification document of each beneficial owner must be uploaded to the BOI filing system.
Only specific types of identification documents are considered acceptable to meet the requirements of the FinCEN.
Detailed information about the reporting companies is also required to be filed with the FinCEN, including such items as the official name of the reporting company, any names that it may use in doing business, and its address. Newly-created companies are required to also provide information about any individuals who formed the new companies.
There is no fee for filing the BOI report with the FinCEN.
While filing a BOI report is not an annual requirement, reporting companies do have to file BOI reports as any information needs to be updated or corrected. Those updated BOI reports must be filed within 30 days of any change.
If the BOI reporting requirements become mandatory again, there are, officially, serious consequences for not filing BOI reports with the FinCEN.
Individuals and reporting companies required to file, but that don't do so face several potential sanctions. Currently, the new Federal regulations include civil penalties of up to $591 for each day that the violation continues as well as criminal penalties of up to two years imprisonment and fines of up to $10,000.
The information filed with the FinCEN will be available to a variety of governmental and financial entities in the U S and beyond.
According to a fact sheet from the Federal government, information from the FinCEN can be utilized, for "…both criminal and civil investigations and actions, such as actions to impose civil penalties, civil forfeiture actions, and civil enforcement through administrative proceedings."
The FinCEN has a 57-page "Small Entity Compliance Guide" available detailing filing requirements for Beneficial Ownership Information. You can view this guide at https://www.fincen.gov/sites/default/files/shared/BOI_Small_Compliance_Guide.v1.1-FINAL.pdf. Additional details on filing requirements, exemptions, and other relevant items for BOI reporting are also available on that website.
As noted previously in this news series, businesses may want to contact an attorney or another professional of their choice to determine whether they may be exempt from filing a BOI report with the FinCEN or if they are or will be required to file a BOI report at some point.
On December 30, 2024, a representative of the U S Department of the Treasury wrote a letter to the leaders of the U S Senate Committee on Banking, Housing, and Urban Affairs that the U S Department of the Treasury "…has determined that a major [security] incident occurred…Based on available indicators, the incident has been attributed to a China state-sponsored Advanced Persistent Threat (APT) actor."
The U S Department of the Treasury has not publicly stated what information was accessed by the APT actor in this security breach and whether the security of the information held by the FinCEN division of the U S Department of the Treasury is similar to the security for the information held by the division of the U S Department of the Treasury that was accessed by the APT actor in this security breach.
[Editor's Note: SUMMARY AND DETAILS to avoid confusion.]
It is confusing - one because there are two different injunctions:
One for a business group that is covered by an injunction issued by a Federal court in Alabama months ago - an injunction still in force for that group.
The second injunction was a nationwide injunction that covered all businesses.
Details:
At the beginning of December, BOI reporting was mandatory - except for businesses that were covered by an injunction by a Federal court in Alabama - for the vast majority of businesses. January 1, 2025, was the deadline for most businesses.
Early in December, a Federal court issued a nationwide injunction. The BOI reporting then became voluntary without penalties attached to those who did not comply.
After that ruling, the Federal government appealed the nationwide injunction and a Federal court lifted the nationwide injunction - not the injunction for the Alabama case - in late December. The BOI reporting then became mandatory again. January 13, 2025, was set as the new deadline. Penalties would apply for those that did not comply.
A few days later - still In late December - a Federal court then reinstated the nationwide injunction. The BOI reporting then became voluntary again. Again, no penalties are attached to those that do not comply.
Ping-pong.
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