More than a year after the Treasury Department introduced its form for companies to report who owns and controls them, legal challenges mean it’s still unclear whether Beneficial Ownership Information (BOI) will end up being required. But experts told CFO Brew that companies are still better off gathering the information in case the government is able to fend off challenges to the law that requires it.
“You should be collecting the information that you need to make a filing, but holding it until the courts provide more clarity,” according to Matthew Bisanz, a partner at Mayer Brown who leads its task force on the Corporate Transparency Act (CTA) and has worked with, by his estimation, 150 clients who had questions about complying with the act over the last year.
The simplicity of the BOI form doesn’t capture how much behind-the-scenes work may be needed to fill it out, according to Christopher Kula, a partner at Dentons who advises mostly private funds on how to comply with the CTA. It can take weeks to look at all the companies a business owns, see whether the law applies, and map out the beneficial owners of each. For example, asset management clients “may have vehicles with hundreds of subsidiaries” that have to report, Bisanz said.
And if the government prevails in its defense of the BOI, you might not have that kind of time to line up your paperwork; when an injunction on the CTA was briefly lifted before Christmas, the Financial Crimes Enforcement Network moved back its initial end-of-year deadline to just Jan. 13.
Where we’re at. The BOI limbo really kicked off on Dec. 3, just a few weeks before the end-of-year filing deadline for companies formed before 2024. That’s when a federal district judge put the law on hold nationwide. Then, a few weeks later, an appeals court panel lifted the injunction.
Three days after that, the injunction was put back in place by a different panel of the same appeals court. In response, FinCEN asked the Supreme Court to lift the injunction for good while the case goes ahead. And in response to that, the high court asked the law’s challengers to respond to the government’s request by Jan. 10. The appeals court is hearing arguments over the law in March, although the high court could order its own case to resolve the issue as well. It could take four to six weeks, if not longer, for the justices to decide “in a case like this,” Bisanz said.
News built for finance pros
CFO Brew helps finance pros navigate their roles with insights into risk management, compliance, and strategy through our newsletter, virtual events, and digital guides.
While the incoming Trump administration could just drop the government’s defense of the CTA, Bisanz doesn’t think that will happen, nor does he think it will spend time undermining the law with administrative actions.
“They probably have higher priorities elsewhere,” he said.
BOIckground. Businesses subject to the CTA have to report beneficial ownership information for each company they own (if the company doesn’t qualify for one of 23 exemptions), which means that for each company they own, they must gather information on anyone who owns or controls at least 25% of the business, senior execs like the CEO and CFO, or someone who can appoint or remove C-suite members or a majority of its board, Kula said. “Important decision-makers,” such as those on the company’s management board, could also be subject to the requirement, he said.
Then there’s the matter of providing personally identifiable information about each of those people, Kula said, which is where the CTA “sort of gets a little controversial.” Dentons usually recommends that clients get a FinCEN identifier number to disclose instead, but still, “you just generally never want to share personally identifiable information if you don’t have to.”
While the BOI data can’t be FOIA’d, FinCEN is sometimes allowed to share some of the disclosed information with the Treasury Department and other governmental bodies, Kula said, which includes federal, state, and local law enforcement.