OMAHA (DTN) -- A U.S. Supreme Court ruling on Thursday will not immediately force millions of businesses to now file Beneficial Ownership Information reports, according to U.S. Treasury officials.
The High Court overturned an order from the U.S. District Court for Eastern Texas from December that had frozen the Treasury Department's rule for filing Beneficial Ownership Information with Treasury's Financial Crimes Enforcement Network (FinCEN).
Still, there is a separate nationwide order issued by a different Texas judge that remains in place. Because of that case, the Treasury Department is currently not requiring companies to file their BOI details with FinCEN.
The BOI rule affects more than 32 million businesses nationally, including an estimated 230,000 farm operations. The rule stems from the 2021 Corporate Transparency Act, which requires businesses to provide their business information from state incorporation reports to FinCEN. The law was passed to curb financial crimes such as money laundering and fraud. The initial deadline for current businesses to file those reports was Jan. 1, 2025. That was initially put on hold by the Texas court.
The Supreme Court ruling overturns the lower court's "stay" on the rule. Currently, the Fifth Circuit Court of Appeals is set for a hearing in March to review whether the requirements of the Corporate Transparency Act are constitutional. The case was brought by a Texas business, Texas Top Cop, as well as the National Federation of Independent Businesses (NFIB) and others.
The Justice Department under the Biden administration appealed the Texas court's stay to the Supreme Court following a ruling in the Fifth Circuit. Business and conservative groups, along with 25 Republican-led states, had filed briefs with the Supreme Court asking the justices to keep the stay in place. Eight of the nine justices agreed with the Biden Justice Department to remove the Texas court's stay.
Yet, the separate court order involves a different case in the same Texas district, Smith v. U.S. Department of Treasury.
Under the rule, beneficial ownership includes anyone with a significant stake in the company, whether or not they have direct legal ties to the business. This may include holding at least 25% of a company's shares, having a similar level of control over the company's equity or holding significant influence over the company's decisions and operations (i.e., the authority to exercise substantial managerial control over the reporting company). Should a business end up involved in illegal activities, each such stakeholder is accountable for the crimes of the business.
BOI details are free to file on the FinCEN website. But companies that failed to file were expected to face penalties of $591 a day. People who willfully violate the requirements could face up to a $10,000 fine and up to two years in prison.
Treasury officials, however, stated, "Reporting companies also are not subject to liability if they fail to file this information while the Smith order remains in force. However, reporting companies may continue to voluntarily submit beneficial ownership information reports.
For more information, see the FinCEN website: https://fincen.gov/…
Chris Clayton can be reached at Chris.Clayton@dtn.com
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