Federal Agency: Small Businesses Don’t Have to File Beneficial Ownership Reports

The U.S. Treasury Department building in Washington on June 6, 2019. Patrick Semansky/AP Photo

Small businesses do not need to file beneficial ownership reports despite a recent U.S. Supreme Court ruling lifting a lower court injunction blocking the reporting requirement, according to a federal agency.

This is because a separate court injunction halting enforcement of the law remains in effect, the Financial Crimes Enforcement Network (FinCEN) announced on Jan. 24.

The reporting mandate is part of the federal Corporate Transparency Act (CTA), an anti-money-laundering law that required millions of business entities to file information returns about their owners by Jan. 1 or face stiff fines. Financial crimes such as tax evasion and money laundering are often carried out through shell corporations.

The statute provides that affected corporate entities must file reports with the federal government about their beneficial owners, which means individuals with substantial control over the entity or who own or control 25 percent of the entity. Entities are required to provide the government with the names of their beneficial owners, along with their birthdates, addresses, and identifying information such as passport or driver’s license numbers.

Under the CTA, an estimated 33 million small businesses face fines of as much as $591 per day should they fail to comply with the new rule, according to a U.S. Treasury Department website. Businesses with more than 20 employees, $5 million in annual sales, and a U.S. office qualify for exemptions from CTA reporting requirements.

The announcement by FinCEN was issued after the Supreme Court voted 8–1 on Jan. 23 to lift a Dec. 5, 2024, nationwide preliminary injunction issued by Judge Amos Mazzant.

Mazzant, of the U.S. District Court for the Eastern District of Texas, found in Texas Top Cop Shop v. Garland that the CTA and the reporting rule were both likely unconstitutional.

The Supreme Court order states that Mazzant’s ruling is “stayed pending the disposition of the appeal” of that ruling in the U.S. Court of Appeals for the Fifth Circuit. The circuit court has scheduled oral argument in the appeal for March 25.

FinCEN, an agency inside the Treasury Department, said the CTA is still blocked because Judge Jeremy Kernodle enjoined the law.

Kernodle, also of the U.S. District Court for the Eastern District of Texas, issued a nationwide preliminary injunction on Jan. 7.

In his order in Smith v. U.S. Department of the Treasury, Kernodle wrote that the plaintiffs in the case were “likely to succeed on the merits of their claim that the CTA and its implementing rule are unconstitutional.”

FinCEN said in light of Kernodle’s ruling, “reporting companies are not currently required to file beneficial ownership information.”

However, they may continue to voluntarily report the information, according to FinCEN.