The U.S. Department of the Treasury has mandated a new compliance deadline of March 21 for millions of businesses to report "beneficial ownership information" (BOI). This measure, part of the Corporate Transparency Act enacted in 2021, requires small businesses to disclose the identities of individuals who own or control them, directly or indirectly. The initiative aims to prevent the use of shell companies for illicit activities by enhancing transparency in business ownership structures.
The BOI reporting requirements affect approximately 32.6 million businesses, including certain corporations and limited liability companies, based on federal estimates. The Financial Crimes Enforcement Network (FinCEN), a bureau within the Treasury, is tasked with enforcing the Corporate Transparency Act. Businesses that fail to comply with these reporting rules may face severe penalties. Civil fines can reach up to $591 per day, adjusted for inflation, while criminal penalties could include fines up to $10,000 and imprisonment for up to two years.
A series of legal challenges had previously hindered the enforcement of these requirements. However, the U.S. District Court for the Eastern District of Texas lifted a nationwide injunction on February 18, allowing FinCEN to proceed with enforcement. This decision followed the court's action to overturn prior rulings that had stalled the measure. As a result, the Treasury extended the deadline by 30 days to provide businesses additional time to fulfill their obligations.
FinCEN has indicated its enforcement priorities will focus on businesses posing significant national security risks. The Treasury Department has also acknowledged potential further delays, emphasizing its flexibility in accommodating businesses' needs for compliance.
"FinCEN will provide an update before then of any further modification of this deadline, recognizing that reporting companies may need additional time to comply with their BOI reporting obligations once this update is provided," – FinCEN
The Corporate Transparency Act reflects a broader governmental push towards financial transparency and combating illegal activities facilitated through anonymous business entities. By enforcing these measures, the Treasury aims to deter criminals from hiding illicit operations behind opaque ownership structures.