The U.S. Department of the Treasury has decided to halt the enforcement of penalties associated with the Business Ownership Information (BOI) reporting requirements. Initially enacted under the Corporate Transparency Act in 2021, these requirements aimed to combat illicit finance and the formation of shell companies. They mandated that small businesses disclose individuals who directly or indirectly own or control them. According to federal estimates, this rule impacts approximately 32.6 million businesses across the country.
The BOI reporting requirements were set to take effect on March 21, 2023. Businesses faced a deadline to comply or risk fines. Non-compliance could result in fines of up to $591 per day, adjusted for inflation, or a total of $10,000, along with up to two years in prison. However, due to past court actions, these requirements were delayed, and now, the Treasury has opted not to enforce them.
The Treasury plans to issue a proposed regulation that would apply the BOI rule solely to foreign reporting companies. This decision marks a significant shift from the original mandate, which included domestic businesses. The shift has garnered mixed reactions; some praise the move for alleviating potential burdens on small businesses, while others express concern over potential national security implications.
The BOI reporting requirements were designed to enhance transparency and prevent illicit finance activities. Businesses were required to report beneficial ownership information to the Treasury's Financial Crimes Enforcement Network (FinCEN). FinCEN has emphasized that these measures are intended to
"make it harder for bad actors to hide or benefit from their ill-gotten gains through shell companies or other opaque ownership structures."
Despite the Treasury's current stance on non-enforcement, advocates for strict regulation argue that this could undermine efforts to secure the financial system. Critics worry about the potential loopholes created by not applying the BOI rules uniformly across all businesses.