Beneficial Ownership Interest (BOI) Challenged in Court

Written by Steven M. Platau, J.D., CPA

The Corporate Transparency Act requires many newly formed entities in 2024 to make a Beneficial Ownership Interest (BOI) filing with the Treasury Department’s Financial Crimes Enforcement Network unit (FinCEN). A large number of existing privately held entities are scheduled to make filings by January 1, 2025.

On Friday, March 1, 2024, Judge Lyles C. Burke, US District Judge for the Northern District of Alabama issued a ruling in the case: National Small Business United v. Janet Yellen. In that ruling, Judge Burke ruled that the Corporate Transparency Act’s BOI filing requirement “is unconstitutional because it exceeds the Constitution’s limits on Congress’ power.”

The ruling enjoins enforcement of the BOI reporting obligation only for the plaintiff in the case. The ruling does not appear to specifically apply to anyone other than the plaintiff in this case. Commentators believe that the US Treasury Department will promptly appeal the ruling to the 11th Circuit Court of Appeals in Atlanta.

There are potentially both criminal and civil penalties for failure to make BOI filings. Those penalties include both prison time and monetary penalties. One of the penalties is a $591/day civil penalty beginning on the 90th day after 2024 entity formation.

If the BOI filing requirement is upheld, it is possible that Treasury will enforce penalties for failure to make filings as initially required under the law.

BMSS continues to recommend that clients consult with their legal counsel on BOI reporting requirements and related filing obligations.