Understanding the BOI Reporting Injunction and What It Means for Your Business

Sally Sherman

Published December 21, 2024

Understanding the BOI Reporting Injunction and What It Means for Your Business

Many business owners in the U.S. just caught a major break — at least temporarily. On December 3, 2024, a federal judge in Texas issued an injunction halting the enforcement of Beneficial Ownership Information (BOI) reporting requirements. These rules, part of the Corporate Transparency Act, were set to impact millions of small businesses across America by requiring them to disclose detailed information about their owners.

With a looming January 1, 2025 deadline, this decision has left many business owners wondering: What now?

The Texas court’s ruling has paused enforcement for now, but it doesn’t erase the complexities and stakes of BOI reporting altogether. Even if penalties are off the table for the moment, understanding whether your business is required to file — and what could happen next — is essential.

In this article, we’ll cover everything you need to know about BOI reporting: what it is, who it affects, and the broader implications of this new legal development. Whether you’re hearing about BOI reporting for the first time or scrambling to meet the original deadline, this article will ensure you understand exactly what is happening and what you need to do next.

TL;DR:

• A Texas court has paused the enforcement of BOI reporting requirements.
• Businesses are not currently required to file, nor will they face penalties for not filing should the law be reinstated.
• The Department of Justice is appealing the case.

What is BOI reporting?

Beneficial Ownership Information (BOI) reporting is a new federal requirement introduced under the Corporate Transparency Act of 2021 to crack down on illegal activities like money laundering, fraud, and terrorism by making it more clear who owns and controls businesses operating in the U.S.

At its core, BOI reporting requires certain businesses to disclose identifying details about their “beneficial owners” — individuals who own or control at least 25% of a business or have substantial control over its operations. Substantial control can include roles like CEOs, presidents, CFOs, or anyone who has significant influence over the company’s decision-making.

Who is affected by BOI reporting?

If your business is a corporation, LLC, or a similar entity registered with a state’s secretary of state (or equivalent office), you are probably required to file a BOI report. The same applies to foreign businesses registered to operate in the U.S.

However, the law has created exemptions for entities that already disclose ownership information through other regulations. Some of these exempt businesses include:

• Large companies: Companies with more than $5 million in annual revenue and 20+ full-time employees.
• Publicly traded companies: Companies that already report ownership information to the SEC.
• Nonprofits and tax-exempt organizations: These include entities like 501(c)(3)s as well as banks and credit unions.
• Certain financial institutions and utilities: Businesses that are already heavily regulated and required to report ownership through other means.

Take a look at this exemption list published by FinCEN for a complete and updated guide to all 23 BOI reporting exemptions.

What does the Texas injunction mean for BOI reporting?

The December 3, 2024 federal court ruling in Texas has effectively paused the enforcement of BOI reporting requirements nationwide. This means:

• Deadlines are stayed: Businesses are not currently required to file BOI reports while the injunction is in effect.
• No penalties for non-compliance: Companies will not face fines or other penalties for failing to file during this time.
• Voluntary filing is allowed: Businesses can still choose to file their BOI reports voluntarily, though it’s not required.

It’s important to note that this ruling doesn’t eliminate the Corporate Transparency Act or its BOI reporting requirements. The Department of Justice has already filed an appeal, which could reinstate the requirements if the ruling is overturned.

What should you do in light of this ruling?

While the Texas injunction has paused the enforcement of BOI reporting, businesses should use this time to prepare for potential changes.

Here’s what you can do to stay ahead:

• Determine if you’re subject to BOI reporting: Take this time to confirm whether your business falls under the BOI filing requirements or qualifies for an exemption.
• Keep an eye on legal updates: Litigation on this matter is far from over. Staying informed will help ensure you’re ready to act if the injunction is overturned.
• Organize ownership information: If filing becomes mandatory again, have your beneficial ownership details — such as names, addresses, and identification documents — organized to make compliance quicker and less stressful.
• Weigh the option of voluntary filing: Filing your BOI report voluntarily remains an option. While not required, doing so could simplify things if enforcement resumes and provide peace of mind if your business complies proactively.
• Consult a professional: If you’re unsure about your obligations or how to proceed, consider seeking advice from a certified accountant or other financial professional.

We don’t know what will happen with BOI reporting moving forward. The best thing you can do is make sure you are prepared for when the courts release their final decision.

Have more tax and financial reporting questions?

Navigating new regulations like BOI reporting can be confusing, especially when paired with other tax obligations your startup or business might face.

If you have questions about your filing responsibilities or want to ensure your business stays compliant, the Digits team is here to help. Our tax experts specialize in simplifying complex requirements and can provide personalized tax advice tailored to your business’s unique needs.

Reach out and book some time with us today, and we can help you get your business’s financial situation in order.

FAQs on BOI reporting and the Texas injunction

1. Are penalties retroactive if the injunction is lifted?

No. Businesses will not face penalties for failing to file during the injunction period. If the injunction is lifted, enforcement will likely resume with a clear grace period for compliance.

2. What happens to BOI reports that have already been submitted?

Businesses that have voluntarily filed BOI reports are not required to take any further action at this time. These reports will remain in FinCEN’s system for now.

3. What information will I need to provide if I voluntarily file?

You will need to first provide some information about your company, including:

• Company’s legal name and any trade name or DBA
• Address
• Jurisdiction it was formed in or first registered in (for foreign companies)
• Taxpayer Identification Number (TIN).

During reporting, you'll also be asked for information regarding all beneficial owners. For each individual, you’ll have to provide:

• Their legal name and birthdate
• Their home address
• An ID number, like a passport number or driver’s license
• An image of the ID used

4. What is the Corporate Transparency Act (CTA), and why was it introduced?

The Corporate Transparency Act (CTA) is a federal law passed in 2021 aimed at combating illicit financial activities like money laundering, fraud, and terrorist financing.

5. Does the Texas injunction mean the CTA is unconstitutional?

Not necessarily. The final outcome will depend on how higher courts, potentially even the Supreme Court, rule on the matter.