Advocacy News – Feb. 20, 2025
What’s happening: On Feb. 18, 2025, the U.S. District Court for the Eastern District of Texas granted the Financial Crimes Enforcement Network (FinCEN) a stay order on its previously issued preliminary nationwide injunction on the enforcement of the Corporate Transparency Act (CTA). As a result, the CTA’s beneficial ownership information (BOI) reporting requirements are now mandatory and due in March.
The big picture: The CTA has been subject to a myriad of legal challenges since it was passed by Congress in 2021. It was intended to make new ownership disclosures to combat financial crime.
- A Texas judge issued a nationwide pause on the CTA last December after finding that the financial transparency law was likely unconstitutional. The Biden administration then asked the U.S. Supreme Court to overturn the lower court’s order, arguing that Congress was within its Commerce Clause authority to regulate economic activities impacting interstate commerce. On Tuesday, the U.S. District Court for the Eastern District of Texas stayed the previous order of a nationwide injunction on enforcement.
Why it matters: BOI filings are now back to mandatory and the potential penalties for non-compliance are harsh. The CTA mandates that companies disclose and regularly update detailed BOI to FinCEN. It subjects covered entities and their “beneficial owners” to vague and complex reporting requirements while putting their sensitive personal information at risk. Failure to comply can result in fines of over $590 per day, as well as felony charges and up to two years imprisonment.
- In 2024, FinCEN estimated that more than 32 million entities would be affected by the ruling that year, with an additional 6 million each subsequent year as new businesses are formed. By the end of 2024, FinCEN received less than 30 percent of the required filings, highlighting the stark education gap when it comes to the compliance obligations mandated by the CTA.
- The CTA impacts domestic reporting companies, including LLCs, corporations and other entities formed through filing with a secretary of state or a comparable office in the U.S., as well as foreign reporting companies that are registered to conduct business in the United States through filing with a secretary of state or an equivalent office.
What now: With the stay lifted, business should prepare to make the appropriate filings or risk violation. FinCEN issued guidance that clarified the new filing deadlines:
- For most reporting companies, the new deadline to file an initial, updated, and/or corrected BOI report is now March 21, 2025.
- Reporting companies formed or registered on or after Feb. 18, 2025, must file within 30 days from the date of creation or registration.
- Reporting companies previously provided with extended deadlines due to disaster relief should follow the later deadlines.
What the MI Chamber is doing: The Michigan Chamber had already joined forces with business groups across the country to call on Congress to pass a one-year delay of the law’s compliance deadline. While no firm action has occurred yet, the legislation appears to have significant support in the Republican-controlled Congress.
- We are closely monitoring this issue and continue to call upon Michigan’s Congressional delegation to work toward a reasonable solution and avoid costly unintended consequences for our state’s small business owners.