BOI Reporting Requirements: March 2025 Update and Impact on Real Estate

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).

In a significant turn of events, the U.S. Treasury Department has announced it will halt enforcement of the Beneficial Ownership Information (BOI) reporting requirements under the Corporate Transparency Act (CTA). This decision follows a recent legal challenge that has raised constitutional concerns about the act’s scope and its impact on small businesses.

The enforcement pause comes after a federal court ruling questioned the CTA’s legality, with critics, including President Donald Trump, arguing that the law is intrusive and places an unnecessary burden on small business owners. While the CTA remains legally in effect, the Treasury’s decision to suspend enforcement has effectively put reporting requirements on hold for the time being.

This latest update adds to the existing legal uncertainty surrounding BOI reporting. Initially, businesses formed before January 1, 2024, were given until January 1, 2025, to comply, while new businesses had 90 days from formation to submit their BOI reports. However, with this enforcement pause, businesses are now left wondering whether these deadlines will be revised, extended, or eliminated altogether.

Status of BOI Reporting and Timeline of Legal Developments

• 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.
• March 1, 2025: The U.S. Treasury confirmed that it would not enforce BOI reporting requirements until further court rulings clarify the law’s future.

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 if BOI Reporting is Enforced?

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.

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.

What This Means for Real Estate Investors

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. 

Key takeaways for real estate investors:

• Treasury has halted enforcement of BOI reporting, creating uncertainty over deadlines.
• Court rulings could reshape the future of the Corporate Transparency Act and its requirements.
• Investors using LLCs should stay informed on potential changes to compliance obligations.

What This Means for 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. The suspension of BOI enforcement raises compliance questions regarding Know Your Customer (KYC) and Anti-Money Laundering (AML) requirements. 

Vaster will continue to track these updates and provide insights into how they impact both real estate investors and financial service providers in the months ahead.

How to Stay Prepared

Even with the temporary halt in BOI reporting enforcement, businesses, real estate professionals, and financial service providers should stay proactive:

• 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 Market Insights newsletter and consult legal experts to ensure your business remains compliant.

Helpful Links

Please note that BOI reporting is currently not mandatory at this time. 

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
Know Your Client (KYC): What It Means and Compliance Requirements | Investopedia