On March 1, a federal district judge in Alabama ruled that the beneficial ownership information (BOI) reporting required under the Corporate Transparency Act (CTA) is an unconstitutional exercise of Congress’s enumerated powers.
The judge granted summary judgment to the plaintiffs in the case of National Small Business United d/b/a the National Small Business Association, et al v. Janet Yellen. In a separate order, the judge enjoined FinCEN from enforcing the BOI against the plaintiffs. FinCEN announced they will comply with the court’s order and not enforce BOI reporting against entities that are members of the National Small Business Association as of March 1, 2024.
It is very likely that the government will appeal the decision to the 11th Circuit Court of Appeals.
What now?
Most companies can take a wait-and-see approach to the BOI litigation — and that’s because, for entities established before January 1, 2024, the required BOI reporting date is not until January 1, 2025.
For entities established on or after January 1, 2024, they only have 90 days from creation under state law to file an initial BOI report.
This means those entities that were not members of the National Small Business Association as of March 1 will need to decide whether to 1) move forward with filing the BOI report or 2) hope another court or Congress provides relief to the BOI filing requirements. Otherwise, they could face civil or criminal late filing penalties under the current BOI rules.