BOI Reporting Requirements: Recent Legal Developments and Impact on Real Estate in 2025

The Corporate Transparency Act (CTA), a federal law enacted in 2021, represents a significant step toward enhancing transparency in business ownership and combating financial crimes. A key component of this law is the requirement for certain businesses to file Beneficial Ownership Information (BOI) reports with the Treasury Department’s Financial Crimes Enforcement Network (FinCEN).

However, recent legal developments have thrown this requirement into question, leaving businesses in a state of uncertainty. BOI reporting is part of a larger global effort to combat financial crimes, and understanding its nuances is critical for businesses aiming to remain compliant and competitive.

Status of BOI Reporting and Timeline of Legal Developments

On December 26, 2024, the Fifth Circuit Court of Appeals suspended the deadline for filing Beneficial Ownership Information (BOI) reports with the Treasury Department’s Financial Crimes Enforcement Network (FinCEN). This means that companies are not required to file a BOI report by previous deadlines, but they can still choose to do so voluntarily. The journey of BOI reporting has been marked by a series of legal challenges, culminating in the current uncertainty:

December 3, 2024: The U.S. District Court for the Eastern District of Texas issued a nationwide preliminary injunction, halting the enforcement of the BOI filing requirement.
December 5, 2024: The Department of Justice (DOJ) appealed to the Fifth Circuit Court, seeking to narrow the injunction or lift it entirely. A request for a similar stay was denied on December 17, 2024.
December 23, 2024: A Fifth Circuit panel temporarily stayed the injunction, reinstating the BOI filing requirement.
December 26, 2024: A different Fifth Circuit panel vacated the stay, reinstating the nationwide injunction and once again pausing the BOI reporting requirement.

The next pivotal date in this legal battle is March 25, 2025, when the Fifth Circuit will determine whether the injunction should remain in place. This decision will likely delay the BOI requirement until at least late March, unless the federal government appeals to the Supreme Court and secures a reversal.

While voluntary compliance is not mandatory, it may help companies streamline their processes and ensure readiness.

What is BOI Reporting?

BOI reporting is a requirement under the CTA designed to identify the individuals who directly or indirectly own 25% interest of the entity or exercise substantial control over the entities. This transparency measure aims to prevent the misuse of anonymous shell companies in activities like money laundering, tax evasion, and other financial crimes.

Who must File?

Under the original mandate, domestic businesses such as corporations, limited liability companies (LLCs), and other similar entities would need to disclose the identities of their beneficial owners. For example, a real estate company holding assets in multiple states would need to report individuals with significant ownership stakes to FinCEN. By identifying beneficial owners, regulators gain critical insight into business structures that might otherwise obscure illicit activities. In addition, foreign entities registered to do business in the US, or its territories, including tribal territories, must also file.

There are 23 exclusions for exempt entities, including but not limited to; publicly traded companies, certain government entities, banks (certain financial institutions), and other large corporations with more than $5 million in gross receipts or sales.

Why BOI Reporting Matters

BOI reporting is a cornerstone of efforts to promote transparency in financial systems worldwide. Initiatives like the CTA aim to close loopholes that allow bad actors to hide assets and evade scrutiny. Failure to file may result in civil penalties of at least $500 per day, and criminal penalties of up to $10,000 and/or two years in prison.

Common Misconceptions About BOI Reporting

Many business owners misunderstand the scope and implications of BOI reporting. Common misconceptions include:

Only large corporations need to file BOI reports: In reality, small businesses, LLCs, and certain partnerships are also required to comply.
Failure to comply results in minor penalties: Non-compliance could result in severe fines and potential criminal charges.
BOI reporting violates privacy: The CTA includes safeguards to ensure that sensitive information is only accessible to authorized parties

Implications for Real Estate and Financial Services

Industries like real estate and financial services face unique challenges under BOI reporting due to their reliance on intricate ownership structures and large-scale transactions.

Real Estate: The real estate sector often utilizes trusts, LLCs, and other entities to facilitate property transactions. BOI reporting aims to shed light on these structures, reducing opportunities for illicit activities such as money laundering. For real estate professionals, this could mean increased scrutiny during transactions and additional documentation requirements.
Financial Services: Financial institutions, including banks and private lenders, play a crucial role in compliance. BOI reporting adds another layer of complexity to these efforts, requiring enhanced verification and reporting protocols.

Despite these challenges, both industries can benefit from improved transparency, which fosters trust among investors, clients, and regulators.

How to Stay Prepared

Despite the current pause in enforcement, businesses should take proactive steps to prepare for potential BOI reporting requirements. Here’s how:

Familiarize Yourself with FinCEN Guidance: Review resources such as the BOI Small Entity Compliance Guide and BOI FAQs to understand reporting requirements.
Identify Beneficial Owners: Determine which individuals or entities qualify as beneficial owners under the CTA’s criteria. For example, any individual owning 25% or more of a business typically qualifies.
Establish Internal Processes: Develop systems for gathering and securely storing BOI. Ensure that your processes can accommodate future updates or changes to the requirements.
Monitor Legal Updates: Stay informed about court decisions and regulatory announcements to ensure your business is ready to comply when necessary.

Next Steps for Businesses in 2025

The BOI reporting requirements under the Corporate Transparency Act remain in legal limbo, creating both challenges and opportunities for businesses. While the current injunction provides a temporary reprieve, companies should use this time to prepare for potential compliance. By staying informed and proactive, businesses can navigate this uncertainty and ensure readiness for whatever lies ahead.

For more updates and insights, subscribe to the Vaster blog and consult legal experts to ensure your business remains compliant.

Helpful Links

Please note that BOI reporting is currently not mandatory. A merits hearing is scheduled for March 25, 2025, and the reporting requirements are suspended at least until the hearing takes place.

For the latest information, visit the FinCen website directly. Linked below:

https://fincen.gov/boi

Disclaimer: This article is for informational purposes only and should not be considered legal or financial advice. Businesses should consult with qualified legal or financial professionals to address specific concerns or questions related to BOI reporting requirements and compliance with the Corporate Transparency Act.

Written and Reviewed by:

Ricardo F. Mazzitelli J.D.

Elizabeth Galan

Sources:
FinCen FAQS | FinCen.gov
Corporate Transparency Act: BOI Reporting Suspended Again | The National Law Review
US Appeals Halts Enforcement of Anti-Money Laundering Law | Reuters
Court Rules BOI Reporting Requirements are on Hold | Forbes