Breaking: Key Updates to Beneficial Ownership Reporting

In January of 2024, the Financial Crimes Enforcement Network (FinCEN) began accepting Beneficial Ownership Information reports with a deadline for businesses to file by December 31st, 2024.

Flash forward to December 4th, 2024, the Federal Court Blocks Corporate Transparency Act Nationwide changing the Beneficial Ownership Information filing requirements for businesses leaving many curious to where it stands currently.

In this bonus episode of The Bottom Line Pharmacy Podcast, we bring back Scott Burnett with Burnett & Associates to give an update on:

• The current status of the Beneficial Ownership Information (BOI) requirements
• Recent preliminary injunction that has temporarily suspended the filing requirements
• Navigating possible changes to come including stays or reinstatements

Join the discussion with us!

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More resources on this topic:  

FinCEN BOI 

Podcast – Urgent Update on BOI Reporting

Scott Burnett on the new FinCEN guidelines

If you prefer to read this content, the video transcript is below:

Scotty Sykes, CPA, CFP®: Everybody wait to the last minute. And then at the last minute, the courts came in, US District Court down in Texas, I believe, right? Came in and said, put a pause on it. So, where are we with BOI, I guess is the question here. 

Scott Burnett: Well, so on December 3rd, the Eastern District or the US District Court, Federal District Court in Eastern Texas made a ruling. It was initially, the hearing, the paperwork was submitted in May, they had a hearing in October and he made a ruling on December 3rd. And it was meant to be a small injunction just for the parties involved, but it ended up being a nationwide injunction. One of the parties that were in the lawsuit was a nonprofit, which would normally be exempt, but their membership had members across the country. So, the judge felt a national injunction was warranted. So that’s where we are. So it’s a preliminary injunction, Scotty. It’s not a permanent injunction, just so understanding these types of things. You have a preliminary injunction, which is a finding that you think the law is in this case, they said they thought it was unconstitutional violation of the commerce clause, 10th amendment, fourth amendment. We get into the details. If you want to be bored out of your core, we could get into all of that. But they felt that the court, the Congress didn’t have the powers to enact the legislation. So what it did is it basically put a temporary freeze, right? So on December 3rd, the freeze is put in place on December 5th. The Department of Justice filed an appeal to that same court. Now, where that leaves us right now is kind of an interesting thing because it’s a preliminary injunction and the DOJ filed an appeal. They didn’t file an expedited appeal. They didn’t ask the court to stay the injunction. So, a stay would be to say, hey, you know, we’re going to keep the law open until this is determined in part because you, if you issue a stay and be like the trial court that just ruled that it was unconstitutional, will have to change its mind. So they did, you they didn’t bother doing that. So the next court up, you have district court, then you have appellate court, then you have the Supreme court. So the next step in the process will be applying to the fifth district of Texas appellate court to make a determination and we feel like they’re going to put that on an expedited track, but expedited track doesn’t mean overnight. So the suspicion is, that the DOJ will file an appeal and ask to stay the injunction. In other words, to reinstate it, keep it going while the matter is adjudicated. So as of right now, looking at the world as it is in the snapshot of this moment, the requirement to file is temporarily suspended. The FinCEN website has acknowledged it and saying these are considered to be voluntary filings now. They’re voluntary filings. What is also suspended is anybody that had to file before the end of the year, unless the stay is implemented, then they put it right back on the track for December 31st. But what is also suspended is any of the people that form new companies this year and that that are in that 90 day window, because that was another requirement. You had to file it within 90 days for any new formation. Those are also stay. So where we are is you could say a suspended animation. We are at the mercy of the courts to determine between the DOJ and the district court whether the law of this is constitutional or not. Now, just one sidebar to that, interestingly enough, this is not the first rodeo for this law. It has gone through other things. There are two federal courts that have already ruled that the CTA, the Corporate Transparency Act, is constitutional. The Federal District Court of Oregon and the Federal District Court of Eastern Virginia have already ruled. So, you have these competing federal courts that have said no and yes, yes. And so, but nobody has taken it to the appellate level and that’s kind of where were going. 

Scotty Sykes, CPA, CFP®: Okay, so if you’re a pharmacy owner right there, right now, looking at the end of the year, you don’t have to file it because of this order. But it is voluntary if you do want to go ahead and just do it and just be done with it. 

Scott Burnett: Yeah,  it’s a voluntary filing. Now, if they do the stay, right, which is the injunction is being put aside and we’re back on track. The problem for a lot of business owners, your clients, my clients, it’s like, you know, they’re not plugged into all the things that are related to this. I mean, most people didn’t even know the CTA even was out there until just recently.  

Scotty Sykes, CPA, CFP®: Right, I saw there was only like six million out of the 30 million that had filed or something at one point. Right. So, you know, and so there, there is a large portion, more than half have not filed. So, if the stay goes into place, our friends over at the FinCEN have told us they wouldn’t be able to handle the demand that would come in. The site would probably crash with all the people. So, if they do file the stay, they put it back on track for December 31st. So, what we are advocating to our clients, what we’re advocating would be to your clients as well is while it is voluntary, we would encourage you to continue to get the information necessary to file so that when the requirement, if it is stayed or if it is reinstated, that they can file without any problems in meeting a deadline. The filing requirements on this are not that onerous. I think it’s more of people just don’t want to do it for reasons that everybody has. But the information you’re sharing is the same information you provide on a tax return. And the information that you’re sharing is the same information that you gave to a bank to open up your bank account. So, there isn’t anything here that is really onerous other than you’re giving it to the Department of Justice whose purpose is to hold the information only for law enforcement purposes. And the goal of it is to track, you know, money launderers, drug traffickers, et cetera, which is good purpose. Most of us, I hope, right? Most of us are not in the world of the people that they’re targeting. It is more preliminary and pre-fungatory for us to just do it. But, you know, if you give people time to an entire year to decide to do it, they’ll wait until the end of the year to do it. And that’s kind of where we are. 

Scotty Sykes, CPA, CFP®: So, go ahead and get the information ready just in case you do have to file it because the penalties, they are steep. You know, if this all gets back into play at the end of the year, penalty is, what, $500 a day for civil and up to $2,000? 

Scott Burnett: Yeah. Yeah. 500 civil, potentially a two year, federal or a felony. And you know, if you think about it, you’re, it’s just the company. It’s the reporting company. So you have the company’s name. It’s state of formation. It’s address, tax ID number, and any DBAs that they operate under. That has to be, that’s the reporting. And underneath that they want to know. Anybody that owns the company or has 25% or more. And that’s their name and address, social security number and a driver’s license or a passport. So again, all of the same stuff that you probably would have provided when you opened up your bank account is being asked here. I think their website isn’t really great. I think that causes some consternation for people. Now we’ve been helping a lot of clients with it and these are not complicated filings. They’re just, they are what they are. So, you can file it, voluntarily file it, get it out of the way, get it done. You could hold off and wait for the determination of it. Like I said, I don’t know what that looks like, to be honest with you. That’s a fascinating thing when you look at the courts and the climate of the world today, particularly politically. 

Scotty Sykes, CPA, CFP®: Yeah, I was going to ask that because you know, got Trump coming in there and they’re talking about cutting regulation, cutting tape. You know, I hear it every day on CNBC here. How that plays into all this. I mean, who the heck knows, I guess, right? 

Scott Burnett: Yeah. Well, it’s interesting because it’s been, it hasn’t been anything that’s been really talked about overtly. It is part of that project 25 playbook, that I believe that they’re trying, you know, the first hundred days of the administration, the transitional thing. It is mentioned in there, you know, that they don’t like it, but, know, it has been, it was set up in 2020, 2021. It was bipartisan in its application or when it was enacted and it’s been in place for an entire, what, 11 months and two weeks. I mean, it, was practically at at the finish line. So it’s interesting. I mean, I don’t, you know, I guess, squeaky wheels get the grease when it comes to stuff like this, more people hadn’t done it than done it. So they were complaining about having to do it as opposed to just doing it, you know, getting it done. 

Scotty Sykes, CPA, CFP®: Yeah. Yeah, yeah, I just assume get it in there and just be done with it. 

Scott Burnett: Well, I say that it’s a voluntary filing. If they remove this, if they remove the preliminary and they make, they stay it, then it’s back on track. The trouble is with stuff like this, just like with tax laws, as you know, sometimes those tax laws come into play and they affect everybody, but not everybody knows about it. Only the people that are really in that industry really are aware of it. And so here you are as a business owner, whether you should comply or not. Well, I hope you get the message, but you may not get the message that it’s done. 

Scotty Sykes, CPA, CFP®: Yeah. And should it get back reinstated, businesses would be, companies would be LLCs and corporations, pretty much any for-profit entity that is registered with the state more or less. And of course, there’s some exceptions for larger businesses, but… 

Scott Burnett: So all corporations, LLCs, limited partnership, professional corporations, anything that is filed with the secretary of state as an entity, business entity, must file. 

Scotty Sykes, CPA, CFP®: So, even real estate entities, just one-off LLCs. Yeah. 

Scott Burnett: Right. Where there are 23 exceptions, right? And a lot of those exceptions are not regulated by the CTA because they’re already compliant with other types of formalities where the information is provided. Investment, co-ops, things like that. The one that is unique, I think, to your universe that might be germane for our discussion would be the exception of a large company. So, a large corporation would not have to qualify if it had a last year’s tax return had over $5 million in gross sales. So, all of your clients are in that universe. Gross sales is not really the denominator for us. They had to also have 20 or more full-time employees in the U.S. and they have to have a physical presence in the U.S. So, if you met that criteria, then you would be exempt from having to file. You would not be on it. Sometimes clients have entities where they don’t use them very much. And so is this a company that would be exempt because it’s inactive? And inactive really means it’s been filed, it’s been registered, but you’re doing nothing with it. Meaning there’s no transactions of any kind. But a lot of times people hold 

Scotty Sykes, CPA, CFP®: Or it just sits there. 

Scott Burnett: These LLCs, they hold, let’s say an asset, like a piece of real estate or something. Maybe it’s raw land. It’s not generating money. That’s still an active company because it has an asset. So inactive would mean like literally it’s empty. It has nothing. It’s not doing anything. It would not have to do it. But if it’s holding something, then it’s not really considered inactive. 

Scotty Sykes, CPA, CFP®: Interesting. 

Scott Burnett: So, I think those would be the two that would probably fall under the universe of our group or our discussion. 

Scotty Sykes, CPA, CFP®: Interesting stuff. 

Scott Burnett: Yeah. How it plays itself out, my brother, I don’t know. Yeah, it’s interesting to see. It was fascinating. Yeah, was fascinating that they didn’t put an expedite on the appeal. And even if they put an expedite, that takes time. You know, an appellate process is not an easy process. It’s like the… 

Scotty Sykes, CPA, CFP®: Why didn’t they do the expedite on it? Why do you think? 

Scott Burnett: Because I think the DOJ is not, this judge has previously in 2021 did a labor law case where he filed a national injunction at the last hour before, previously. so I think what’s happening with the DOJ on this one is this is a federal district court that would be governed by the fifth district in Texas appellate court. And I think what they’re going to do is they’re going to go right to the appellate and that’s where the expedites will be filed and things like that, where they’ll try to convince the court in a hearing that they should stay this while we determine it. So to keep it on track for all the people that did in fact file. So that’s, I think what’s happening. It’s almost a gamesmanship a little bit, you know, everybody’s doing a little bit of what is the strategic thing to do to get it done. But I think a lot of commentators, I was surprised that it wasn’t an expedited file. 

Scotty Sykes, CPA, CFP®: Well, if you haven’t filed yet, pay attention because this thing, I guess, is changing by the week, by the month. So, pay attention and reach out to Scott if you got any questions. 

Scott Burnett: Yeah. What I would say is that what I will, yeah, what I can do for your group is as soon as we hear, I’ll get back to you with an update and then you can disseminate that, let everybody know about it. What I’m encouraging people to do is get it done, right? The information is not anything that is really truly private anyway. So, you can just get it done but at the very least gather the information necessary to file it so that if it is in fact returned, you are ready to rock and roll on a moment’s notice with it. To sit and just hope that something turns out to be the way you don’t, that you want it to be, in this case may not be Phi Beta Kappa. 

Scotty Sykes, CPA, CFP®: And if you do have a complex ownership situation, you do need to probably get some professional help such as yourself, right Scott? mean, it’s a little tricky when you start bringing in LLCs owning LLCs and different partners and things like that, I’m sure. 

Scott Burnett: Yeah, because the way it’s everything is reporting company, right? And then ownership under that. Well, a lot of our clients have ownership owned by ownership, right? And that ownership is owned by a trust. Well, you know, you have this reporting company, so you don’t report this company as the owner. You have to report the owner of that company here and then that company here. But then you have this trust and you have that sort of interesting catchall called substantial control. So, not only does an owner have to be listed, but anybody that has control, which could be a CFM, could be a board of director member, a manager, and it could be a trustee. So, if the beneficiary and the trustee are not the same, then the trustee that is not the beneficiary, and you see this a lot in irrevocable trusts, that trustee must also be reported on the BOI. So, when you get into the attribution, and the sophistication of it, the good advice sometimes for clients would be to have somebody assist them with it. Cause the site itself, the BOI site, it’s impossible, as you can imagine, to go through all the intricacies of every fact pattern. so. 

Scotty Sykes, CPA, CFP®: And the reason I mentioned that is I saw a web email from another pharmacy group out there and they were saying that you shouldn’t pay to have this done. But if you got those complex ownership situations and the trust and things, you might want to get a second, somebody help you out on that. So just want to. 

Scott Burnett: Yeah, I had a, I had an interesting one and I got the schematic of their planning and, know, looked like the Normandy invasion for D-Day. You know how it’s got the arrows and everything pointing at Omaha Beach over here.  

Scotty Sykes, CPA, CFP®: Gosh, blood pressure spike right there. 

Scott Burnett: But, well, it’s sophisticated planning and it requires attention, but it’s the attribution, I think that really, you know, following it, following it up and.  

Scotty Sykes, CPA, CFP®: It is, it is. 

Scott Burnett: We’re all concerned about privacy. I am, I’m sure you are as well. And I know your clients are, but again, the site is not an accessible site to anybody except law enforcement. I suppose that could be an area of concern or consternation for some, but again, it’s the information we’ve already surrendered in one form or another to public government organizations and private. So, it’s just already out there. 

Scotty Sykes, CPA, CFP®: Well, thank you, Scott, for the update. And as the updates come, we’ll get you back on here for a few minutes and keep our clients updated. So thanks again, Scott. And if you got questions on this, folks, Scott is the man to 

Scott Burnett: Appreciate you guys. Thank you very much.