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WESTERN CPE BLOG

Providing the latest tax news, information, and updates for tax and finance professionals

Court Battle Pauses BOI Reporting: Critical Updates for Accounting Professionals

Beneficial Ownership Information (BOI) reporting requirements, as defined in the Corporate Transparency Act (CTA) (P.L. 116-283), have undergone significant fluctuations in recent weeks. As legal interpretations continue to evolve, accounting professionals find themselves at the intersection of urgent client needs and rapidly changing compliance requirements. Navigating the miasma of shifting requirements is challenging—especially as your clients actively look to you for guidance. To keep you informed (and help you keep your clients compliant), this blog provides relevant updates, a review of the current legal state of BOI reporting, and suggested preparation strategies for accounting professionals. For an overview of the CTA and BOI reporting mandate, as well as a walkthrough of report filing options, explore our CPE on the subject.

Background: Legislative Intent and Compliance Rationale

The CTA, enacted by Congress in 2021, mandates that certain entities must disclose their “beneficial owners” and “company applicants” in an effort to curtail the use of shell companies for money laundering, tax evasion, and other illicit activities. The law tasks the Financial Crimes Enforcement Network (FinCEN), part of the Treasury Department, with collecting specific information from businesses. According to FinCEN, entities that are considered “reporting companies” are required to file a beneficial ownership information report (BOIR). An entity likely meets the definition of a reporting company if they are “a corporation, a limited liability company, or were otherwise created in the United States…or a foreign company registered to do business in any U.S. state.” Some entities are exempt from BOI reporting requirements, such as “publicly traded companies, nonprofits, and certain large operating companies.” In total, twenty-three types of entities are exempt, details of which can be found here.

Under the legislation, the BOIR must contain accurate and truthful identifying information about individuals that:

  • Directly or indirectly own or control at least 25% of a reporting company, or
  • Exercise “substantial control” over the company.
  • Filed formation documents for companies formed after January 1, 2024.

There is no maximum number of individuals meeting the definition of beneficial owner who must be reported. Additionally, when it comes to any future changes specifically with regards to beneficial owners, reporting companies are required to file an updated report.

Until recently, these requirements were set to take effect on January 1, 2025 (later extended to January 13, 2025). Failure to comply could trigger significant penalties, including daily fines and potential criminal liability. However, a series of injunctions and appellate proceedings have repeatedly altered these deadlines and enforcement expectations, leaving many businesses and professionals uncertain about what’s actually required right now.

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Relevance to Accounting Professionals

Accounting professionals now find themselves at the forefront of BOI compliance. Clients are potentially exposed to unnecessary risk when they are uninformed or advised in error.  Beyond safeguarding client interests and protecting them from the potential civil and criminal penalties for failing to meet BOI reporting requirements, awareness of deadlines and potential penalties can protect practitioners from reputational harm. Because these requirements have been subject to so much uncertainty, it’s even more important to employ clear communication strategies and a proactive approach that anticipates the reinstatement of mandatory filing obligations. Integrating BOI data-collection processes into existing workflows—such as annual tax preparation or corporate compliance reviews—can minimize confusion, reduce time-intensive searches for ownership documents, and ensure that relevant information is available if the courts reinstate the reporting mandate on short notice.

Legal Developments in December 2024

The following chronology highlights key dates and court orders that have shaped the evolving status of Beneficial Ownership Information (BOI) reporting. Multiple injunctions, along with a complex appellate process in the U.S. Fifth Circuit Court of Appeals, have created a high degree of uncertainty for accounting professionals and their clients.

Tracking these events provides critical context concerning the path to the current enforcement suspension, while also preparing professionals for possible future changes.

  1. December 3, 2024: In Texas Top Cop Shop, Inc., et al v. Garland et al, a federal district court in Texas granted a nationwide preliminary injunction, effectively suspending enforcement of FinCEN’s BOI reporting requirements. Entities and their advisors were no longer required to file by the earlier January 1 deadline.
  1. December 23, 2024: The “motions panel” of the Fifth Circuit Court of Appeals lifted the injunction and reinstated the reporting mandate, setting an extended enforcement deadline of January 13, 2025. Many accounting professionals resumed preparations to file reports on behalf of their clients.
  1. December 26, 2024: In an unexpected move due to how quickly it occurred, the “merits panel” of the same appellate court vacated the motions panel’s decision, once again suspending enforcement. As a result of this second ruling, FinCEN issued updated guidance stating that no liability would accrue to those failing to file during the injunction period. Oral arguments in the case are scheduled for late March 2025, and it is not yet known how long the injunction will remain in place.

Presently, FinCEN is currently enjoined from enforcing BOI reporting requirements. Reporting is not currently required, and penalties will not be imposed for failing to submit information during the injunction. That said, voluntary filings are being accepted by FinCEN by anyone anticipating the eventual lifting of this latest injunction.

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Considerations for Advising Clients

Although the BOI filing requirement has been paused, it is prudent for professionals to remain prepared for a scenario in which the injunction is lifted with limited notice. As recent events have demonstrated, this is a situation that can change quickly. The following measures may help ensure readiness:

  1. Collection of Ownership Data: Professionals may wish to advise clients to compile a list of all individuals who meet the 25% ownership or “substantial control” thresholds, as well as the Company Applicant information for those entities to which this requirement pertains. Identification documents (including valid forms of government-issued ID) should also be gathered in anticipation of potential reinstatement of the filing mandate.
  2. Ongoing Monitoring of Legal Developments: Periodic monitoring of FinCEN announcements and court rulings is advisable. Regulatory updates can occur without extensive lead time, making awareness of any changes critical to client compliance.
  3. Documentation of Client Communications: Professionals who counsel clients regarding the voluntary or suspended nature of reporting are encouraged to document these recommendations in writing. Thorough documentation can help clarify the decision-making process should enforcement obligations be reactivated.
  4. Preparation for a Compressed Compliance Window: In the event that the injunction is lifted, deadlines may be relatively short. Entities with pre-assembled data can expedite the submission process. Establishing client-specific timelines and checklists may minimize the risk of error or oversight.

To assist in communicating with clients about this situation, we’ve provided a free sample Client Letter. It summarizes the current status of BOI requirements (including the recent injunction and its effect on deadlines), clarifies the key data companies will need to collect should they choose to voluntarily report, and outlines how your practice can assist. Before use, please read it carefully to make sure that you agree with the contents of the letter, particularly noting that the letter offers your services to complete the reporting.

Potential Outcomes and Future Projections

Ongoing litigation and legislative dynamics continue to shape the future of BOI enforcement. Although no definitive timeline exists for final resolution, we can speculate about a few plausible scenarios:

  • Injunction Lifted Following Oral Arguments: The Fifth Circuit Court of Appeals is expected to hear oral arguments in late March 2025. If the court determines that the CTA and its BOI requirements are within Congress’s constitutional authority, the injunction may be lifted on relatively short notice. Under such circumstances, the previously announced deadlines may be reinstated—or the court may authorize an entirely new deadline. Firms that have already gathered beneficial ownership data can submit filings promptly if the deadline reemerges.
  • Continuation of the Injunction and Further Judicial Review: The appellate court may elect to maintain the injunction while deliberating the broader constitutional issues raised by the plaintiff. Such a decision would preserve the current suspension of enforcement and keep businesses in a state of uncertainty. This scenario has the potential to extend well beyond March 2025 if further motions or appeals are lodged.
  • Supreme Court Intervention: Should either party seek and obtain certiorari from the Supreme Court, the validity of the CTA’s reporting provisions could be evaluated at the highest judicial level. Supreme Court review often involves an extended timeline, potentially leaving the injunction in force (or reinstating it, if lifted) during the pendency of the appeal. This would add another layer of complexity to planning efforts undertaken by professionals and their clients.
  • Congressional or Regulatory Amendments: Legislative or administrative bodies may intervene to clarify, revise, or postpone BOI filing obligations if they deem further regulatory guidance necessary. This might include amending the CTA to adjust filing deadlines or to address constitutional concerns raised by the courts.

Regardless of the path forward, accounting professionals may wish to advise clients to maintain up-to-date ownership information and remain vigilant for new court orders or FinCEN directives. Documenting advice and actions during this period can also mitigate future risk, should enforcement recommence with limited advance notice.

Conclusion

While the current injunction has put mandatory BOI reporting on pause, it’s clear that the situation could rapidly change. Taking time now to gather ownership data, monitor legal updates, and establish communication plans with clients can prevent a scramble if deadlines or obligations are reinstated. Staying tuned to official FinCEN announcements and following ongoing court developments will ensure that professionals can pivot and provide accurate guidance the moment any new ruling or requirement emerges.

For now, the best approach is to remain informed, organized, and ready to adapt. By employing a proactive strategy—one that includes consistent monitoring, thorough documentation, and flexible planning—accounting professionals can protect their clients from unexpected penalties and maintain a reputation for reliable, comprehensive service. When new deadlines are announced, having these pieces in place will make it easier to steer clients confidently through the next phase of CTA enforcement.

As for our part, we’ll post further updates as the latest court rulings, deadlines, or guidance from FinCEN emerge.

Stay tuned—and stay compliant.

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