The U.S. Treasury Department has announced that it will not enforce any penalties or fines associated with the Beneficial Ownership Information (BOI) reporting requirements under the Corporate Transparency Act (CTA) at this moment. This decision effectively halts penalties for U.S. businesses that fail to report their beneficial owners under the previously set regulatory deadlines, marking a major shift in federal policy.
Why Was BOI Enforcement Suspended?
There are three main reasons behind the Treasury’s decision to stop enforcing the BOI rule:
1. Legal Challenges and Court Rulings
The BOI requirement has been the subject of a series of ongoing lawsuits from business groups, who argue that it:
Violates privacy rights by requiring small business owners to disclose personal information to the government.
Imposes unnecessary compliance burdens: especially on small businesses that already report ownership details to other regulatory agencies.
Exceeds the Congress’s power:
There are a series of conflicting court decisions in this regard. In December 2024, a Texas federal court initially issued a nationwide preliminary injunction against the enforcement of the CTA in the Texas Top Cop Shop case. The Fifth Circuit Court of Appeals lifted this preliminary injunction weeks later, then reinstated it shortly after. In January 2025, the U.S. Supreme Court stepped in to stay the nationwide injunction. In light of such decision, in February, the Texas federal judge stayed the injunction in a separate case. Amid this legal back-and-forth, the Treasury Department has ultimately decided to suspend the enforcement associated with the BOI reporting.
2. Business Opposition and Compliance Burdens
Small business owners have been vocal in their opposition to the BOI rule. Many argued that it placed significant administrative burdens on businesses that lacked the resources to handle complex federal reporting requirements. Unlike large corporations with compliance teams, small business owners would have been forced to navigate a complicated reporting system on their own.
3. Political and Regulatory Shift
The Trump administration and Treasury Secretary Scott Bessent have prioritized reducing regulatory burdens on businesses. Trump called the BOI rule "outrageous and invasive" and praised the decision to suspend enforcement indefinitely. Treasury officials have also suggested that the rule may be rewritten to apply only to foreign-owned companies rather than U.S.-based businesses.
What Happens Next?
The BOI rule is still technically part of the law, but with enforcement halted, businesses are not required to comply for the time being. However, the Treasury Department has indicated that it may:
Revise and limit the scope of the rule, possibly only applying it to foreign-owned companies.
Introduce a new rule with clearer guidelines to reduce compliance burdens.
Continue legal battles with business groups and Congress over whether the BOI rule should be permanently repealed or reinstated.
An interim final rule is expected by March 21, 2025, which should provide further clarification.
If you have any questions about BOI reporting requirements, please contact our Partner, Fiona Xu, at contact@consultils.com.
Disclaimer: The materials provided on this website are for general informational purposes only and do not, and are not intended to, constitute legal advice. You should not act or refrain from acting based on any information provided here. Please consult with your own legal counsel regarding your specific situation and legal questions.
Fiona Xu, Esq. is the Partner and Head of Transactions of ILS.
She has extensive experience supporting global and high-growth technology companies on compliance and business needs. Her practice focuses on regulatory compliance across different sectors, with a focus on sector-specific regulations for artificial intelligence (AI) and medical devices. She supports multinational corporations in establishing and maintaining U.S. operations, managing legal and compliance challenges in various areas such as Privacy, Export Control, and CFIUS issues.
Email: contact@consultils.com | Phone: 626-344-8949
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