BOI reporting changes don’t affect CTA’s constitutionality, filing says

The federal government in a court brief continued to defend the constitutionality of the Corporate Transparency Act (CTA), P.L. 116-283, even though the government has, at least temporarily, eliminated the need for domestic companies to report beneficial ownership information (BOI) as part of the legislation.

In the supplemental brief filed Wednesday in the Eleventh Circuit in National Small Business United et. al. v. U.S. Department of the Treasury, et al, No. 24-10736, the government said the interim final rule that removed the BOI filing requirement for domestic companies was an executive branch action that does not affect the CTA’s constitutionality.

The BOI filing requirement still applies to foreign companies registered to do business in the United States under the interim final rule from the Financial Crimes Enforcement Network (FinCEN), which administers the CTA, the anti-money laundering law that Congress passed in 2021. The interim final rule, announced Friday by FinCEN, was published Wednesday in the Federal Register.

“This change in how the Executive Branch is implementing the CTA does not directly affect this Court’s analysis of plaintiffs’ facial constitutional challenge, which turns on whether the statutory reporting requirements are within Congress’s broad powers under the Commerce Clause and Necessary and Proper Clause,” the brief said.

The Justice Department appealed to the Eleventh Circuit after a federal district court in Alabama granted the plaintiffs’ motion for summary judgment in National Small Business United v. Yellen, No. 5:22-cv-1448-LCB (N.D. Ala. 3/1/24), holding that the CTA is unconstitutional. The government is asking the Eleventh Circuit to reverse that decision.

Interim final rule

The interim final rule revises the definition of “reporting company” to mean only those entities that are formed under the law of a foreign country and that have registered to do business in any U.S. state or tribal jurisdiction by the filing of a document with a secretary of state or similar office (formerly known as “foreign reporting companies”). The rule notes that foreign reporting companies “present heightened national security and illicit finance risks.”

FinCEN also exempts entities previously known as “domestic reporting companies” from BOI reporting requirements.

In addition, the rule exempts foreign reporting companies from having to report the BOI of any U.S. persons who are beneficial owners of the foreign reporting company and exempts U.S. persons from having to provide such information to any foreign reporting company for which they are a beneficial owner.

Under the new rule, the filing deadline for foreign entities that were registered to do business in the United States before the date of publication of the rule in the Federal Register is 30 days from the date of publication (i.e., April 25, 2025, for most companies).

Meanwhile, foreign entities that register after the publication date of the rule have 30 days to file an initial BOI report after receiving notice that their registration is effective.

AICPA advocacy

The AICPA and state CPA societies wrote numerous letters to Congress and FinCEN urging a delay in the BOI reporting deadline. The AICPA regularly updates its BOI reporting resource center.

— To comment on this article or to suggest an idea for another article, contact Martha Waggoner at Martha.Waggoner@aicpa-cima.com.