Confused or Lost with your BOI Report? 30-Minute Filing by Following these 5 Steps: Due Date, Entity Confirmation, Beneficial Owners, File Report, & Update Report
Let me begin by saying this is a very good article. I appreciate how you have simplified the information into easy steps for business owners and readers to digest and follow to complete their BOI report. To be honest, I was not aware of this filing requirement by FinCEN until reading your article. So naturally, I had to learn more… The more I read, the more I began to question the constitutionality of the CTA’s reporting requirement.
It should be noted that I am coming at this from a legal perspective and not necessarily a tax perspective. I began by looking into the case law on this issue and found that several lawsuits have been filed, including one by the National Small Business United, dba the National Small Business Association, and another by the Small Business Association of Michigan. To date, the U.S. District Court for the Northern District of Alabama, Northeastern Division, has granted summary judgment to the National Small Business United, declaring that “[The CTA] is unconstitutional because it cannot be justified as an exercise of the Congress’ enumerated powers.”
The court's decision in NSBA v. Yellen was based on the principle that Congress must act within the limits of its enumerated powers under the Constitution. Historically, states have had the authority to regulate businesses, including the formation and governance of corporations, LLCs, and other entities. This state-centric approach to business regulation is rooted in the Constitution’s allocation of powers, where any authority not explicitly granted to the federal government is reserved for the states.
The court found that the CTA did not fall under the Commerce Clause, the Necessary and Proper Clause, or Congress' powers related to foreign affairs and national security. Specifically, the CTA's requirement for entities to disclose personal information of beneficial owners was deemed to exceed the scope of Congress' authority, as it regulates internal state affairs, which are traditionally under state jurisdiction. The ruling emphasized that the CTA lacked a sufficient nexus to any enumerated power, making it an overreach of legislative authority.
The court held that the CTA failed on all constitutional arguments presented. It could not be justified under the Commerce Clause because the act of incorporating a business is not itself an economic activity that substantially affects interstate commerce. The Necessary and Proper Clause did not support the CTA because the law was not an essential part of a broader regulatory scheme and was not closely tied to any of Congress' enumerated powers. Lastly, the arguments for the CTA under Congress' powers related to foreign affairs and national security were found insufficient, as the regulation of state-incorporated entities remains primarily a state concern.
As a result, this decision enjoined the enforcement of the CTA against the plaintiffs and NSBA members, but FinCEN has maintained that other entities must still comply with the reporting requirements. The Justice Department has appealed the decision, and the case is now pending before the Eleventh Circuit Court of Appeals. The outcome of this appeal will be critical in determining the future of the CTA and its application to businesses nationwide, but FinCEN has been clear that they intend to continue to enforce the BOI reporting requirements while their case is pending before the Eleventh Circuit Court of Appeals.
Nonetheless, it is important for business owners, officers, and anyone who falls under this reporting requirement to ensure that they are following the reporting information that you have provided so that they do not find themselves subject to criminal penalties. It will be interesting to see how the appellate courts address these issues.
Case Cited: Nat'l Small Bus. United v. Yellen, No. 5:22-cv-1448-LCB, 2024 U.S. Dist. LEXIS 36205 (N.D. Ala. Mar. 1, 2024)
Cody - Thanks for this extensive research - much appreciated! I’ve been following this as well, and while I object on moral grounds to what I see as an overreach of the federal government, I have a lot of concerned business owners who don’t want to get tangled up with this. I’m sure it will work its way through the courts - please keep me and my readers updated on new developments in the comments of this article if you don’t mind!
Hi Greg, we use Adobe Premier Pro. My team that helps with the video editing is ND-Knows https://www.nd-knows.com/ - they are great! If you need an introduction by email, message me directly
Well done presentation and information. My revokable living trust owns my entities. My wife and I are the beneficiaries. Do you know how I would report that on the BOI?
Hi Greg, regarding your trust, that can be a bit tricky. You can follow this diagram on the BOI website - https://www.fincen.gov/boi-faqs#C_1 and https://www.fincen.gov/boi-faqs#C_3 - which should give you more clarity. Likely, if you didn't have to file with the Secretary of State (most do not), then you are exempt. If your trust owns shares in a reportable entity (a business of some sort), then you and your wife as the flow through beneficiaries would be reported as Beneficial Owners on the reportable entity's filing.
Hi Mark,
Let me begin by saying this is a very good article. I appreciate how you have simplified the information into easy steps for business owners and readers to digest and follow to complete their BOI report. To be honest, I was not aware of this filing requirement by FinCEN until reading your article. So naturally, I had to learn more… The more I read, the more I began to question the constitutionality of the CTA’s reporting requirement.
It should be noted that I am coming at this from a legal perspective and not necessarily a tax perspective. I began by looking into the case law on this issue and found that several lawsuits have been filed, including one by the National Small Business United, dba the National Small Business Association, and another by the Small Business Association of Michigan. To date, the U.S. District Court for the Northern District of Alabama, Northeastern Division, has granted summary judgment to the National Small Business United, declaring that “[The CTA] is unconstitutional because it cannot be justified as an exercise of the Congress’ enumerated powers.”
The court's decision in NSBA v. Yellen was based on the principle that Congress must act within the limits of its enumerated powers under the Constitution. Historically, states have had the authority to regulate businesses, including the formation and governance of corporations, LLCs, and other entities. This state-centric approach to business regulation is rooted in the Constitution’s allocation of powers, where any authority not explicitly granted to the federal government is reserved for the states.
The court found that the CTA did not fall under the Commerce Clause, the Necessary and Proper Clause, or Congress' powers related to foreign affairs and national security. Specifically, the CTA's requirement for entities to disclose personal information of beneficial owners was deemed to exceed the scope of Congress' authority, as it regulates internal state affairs, which are traditionally under state jurisdiction. The ruling emphasized that the CTA lacked a sufficient nexus to any enumerated power, making it an overreach of legislative authority.
The court held that the CTA failed on all constitutional arguments presented. It could not be justified under the Commerce Clause because the act of incorporating a business is not itself an economic activity that substantially affects interstate commerce. The Necessary and Proper Clause did not support the CTA because the law was not an essential part of a broader regulatory scheme and was not closely tied to any of Congress' enumerated powers. Lastly, the arguments for the CTA under Congress' powers related to foreign affairs and national security were found insufficient, as the regulation of state-incorporated entities remains primarily a state concern.
As a result, this decision enjoined the enforcement of the CTA against the plaintiffs and NSBA members, but FinCEN has maintained that other entities must still comply with the reporting requirements. The Justice Department has appealed the decision, and the case is now pending before the Eleventh Circuit Court of Appeals. The outcome of this appeal will be critical in determining the future of the CTA and its application to businesses nationwide, but FinCEN has been clear that they intend to continue to enforce the BOI reporting requirements while their case is pending before the Eleventh Circuit Court of Appeals.
Nonetheless, it is important for business owners, officers, and anyone who falls under this reporting requirement to ensure that they are following the reporting information that you have provided so that they do not find themselves subject to criminal penalties. It will be interesting to see how the appellate courts address these issues.
Case Cited: Nat'l Small Bus. United v. Yellen, No. 5:22-cv-1448-LCB, 2024 U.S. Dist. LEXIS 36205 (N.D. Ala. Mar. 1, 2024)
Cody - Thanks for this extensive research - much appreciated! I’ve been following this as well, and while I object on moral grounds to what I see as an overreach of the federal government, I have a lot of concerned business owners who don’t want to get tangled up with this. I’m sure it will work its way through the courts - please keep me and my readers updated on new developments in the comments of this article if you don’t mind!
Thank you, Mark. What video editing software do you use?
Hi Greg, we use Adobe Premier Pro. My team that helps with the video editing is ND-Knows https://www.nd-knows.com/ - they are great! If you need an introduction by email, message me directly
Hi Mark,
Well done presentation and information. My revokable living trust owns my entities. My wife and I are the beneficiaries. Do you know how I would report that on the BOI?
Hi Greg, regarding your trust, that can be a bit tricky. You can follow this diagram on the BOI website - https://www.fincen.gov/boi-faqs#C_1 and https://www.fincen.gov/boi-faqs#C_3 - which should give you more clarity. Likely, if you didn't have to file with the Secretary of State (most do not), then you are exempt. If your trust owns shares in a reportable entity (a business of some sort), then you and your wife as the flow through beneficiaries would be reported as Beneficial Owners on the reportable entity's filing.