The Treasury Department has announced it’s suspending enforcement of beneficial ownership information reporting against U.S. citizens and domestic reporting companies. According to a press release on the Treasury’s website, “not only will it not enforce any penalties or fines associated with the beneficial ownership information reporting rule under the existing regulatory deadlines, but it will further not enforce any penalties or fines against U.S. citizens or domestic reporting companies or their beneficial owners after the forthcoming rule changes take effect either.”
The news is a complete 180 from the most recent update surrounding the BOI reporting requirements—just two weeks ago, on Feb. 17, the Financial Crimes Enforcement Network posted that reporting requirements are back in effect, with a new deadline of March 21, 2025, for most companies. That development followed a Texas Federal District Court judge lifting an injunction that had temporarily suspended Corporate Transparency Act enforcement pursuant to the Smith v. United States Department of the Treasury case.
The controversial BOI reporting was enacted pursuant to the CTA to require companies to submit information about themselves and their beneficial owners to FinCEN. The rules have been the subject of headlines and client alerts over the last few months due to ongoing litigation challenging their constitutionality. The uncertainty over their fate had many clients in limbo, with advisors warning clients to keep abreast of developments.
The Treasury cites its sudden change of heart on the reporting requirements as a “step in the interest of supporting hard-working American taxpayers and small businesses.” The reporting was enacted in 2021 to allow government agencies to better track and prevent financial crimes by bad actors hiding behind shell companies, including money laundering, tax evasion, and other illicit activities. The Treasury has said it will issue a proposed regulation to apply the rule to foreign reporting companies only.
While many clients, especially small businesses, may breathe a sigh of relief, some experts have expressed concern over the decision, particularly regarding the ramifications for national security.