Court Puts Hold on Treasury’s Small Business Ownership Rule Amid Constitutional Scrutiny

A recent court ruling has temporarily halted the implementation of a key Treasury Department rule concerning beneficial ownership information (BOI) reporting for small businesses. The decision comes as legal challenges question the constitutionality of the rule, leaving many companies uncertain about their reporting obligations.

The injunction, which prohibits enforcement of the rule, was issued in response to concerns raised by various stakeholders. Daniel Stipano, a legal expert, noted, "While it is not known how long the injunction will remain in effect, the case is calendared for oral argument en banc on March 25, 2025, so we expect that the injunction will be effective at least through March." This timeline suggests that businesses will remain in limbo regarding the rule's requirements for several months.

In light of this ruling, Stipano emphasized, "The bottom line is that no one needs to file a BOI Report – unless and until the injunction is lifted." This clarity offers some relief to small business owners who might have been preparing to comply with the reporting requirements.

As the situation develops, the Financial Crimes Enforcement Network (FinCEN) has indicated that companies may still choose to submit beneficial ownership information reports voluntarily. "Reporting companies may continue to voluntarily submit beneficial ownership information reports," FinCEN stated. This option allows businesses that wish to be proactive in compliance efforts to do so, albeit without the pressure of mandatory reporting.

The Treasury's small business ownership rule was designed to enhance transparency and combat money laundering by requiring companies to disclose their beneficial owners. However, critics argue that it imposes undue burdens on small businesses and raises privacy concerns. The ongoing legal proceedings are expected to address these issues and determine the future of the regulation.

As the March 2025 hearing date approaches, all eyes will be on the court's deliberations. The outcome could significantly impact how small businesses report ownership information and navigate regulatory compliance moving forward.