The U.S. Department of the Treasury has made a change to a previous requirement, pushing back the deadline for small businesses to submit beneficial ownership information reports to January 13, 2025, in order to prevent some small businesses operating in the U.S. from facing fines for failing to comply with this new regulation.
Initially, the U.S. Treasury Department required many businesses operating in the U.S. to submit their initial Beneficial Ownership Information report to the Financial Crimes Enforcement Network (FinCEN) by January 1, 2025. According to federal government estimates, this applies to approximately 32.6 million businesses, including certain corporations, limited liability companies, and other types of enterprises. Non-compliant businesses could face fines of up to $10,000 or more.
According to CNBC, the delay was due to legal challenges to the new requirement. The requirement was set forth in the Corporate Transparency Act passed in 2021 and went into effect in January of this year, aiming to curb illicit financial activities.
According to FinCEN, businesses and owners who fail to report may face civil fines of up to $591 per day, in addition to potential criminal fines of up to $10,000 and up to two years in prison.
However, many small businesses may be exempt. For example, companies with total sales exceeding $5 million and employing more than 20 full-time employees may not need to submit reports.
The reason for the Treasury Department’s extension of the compliance deadline is due to a court ruling.
On December 3, a federal court in Texas issued a nationwide preliminary injunction temporarily blocking FinCEN from enforcing the provision. However, on December 23, the U.S. Court of Appeals for the Fifth Circuit overturned this injunction. The litigation is still ongoing, and the Fifth Circuit has not made a ruling on the constitutionality of the Corporate Transparency Act.
FinCEN stated on its website, “The Treasury Department recognizes that given the prior effective period of the preliminary injunction, companies needing to file reports may need more time to comply with the requirements, so we have extended the deadline for filing reports.”
Many businesses are not bound by this new requirement, such as large corporations, banks, credit unions, tax-exempt entities, and public utilities, as they have already provided similar data.