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Corporate Transparency Act - BOI Reporting Deadline Approaching

Breaking News - Dec. 4, 2024

BOI Reporting Blocked by Preliminary Injunction

Less than a month before a Jan. 1, 2025, deadline for businesses to report their beneficial owners to the Financial Crimes Enforcement Network (FinCEN), a federal judge in Texas has issued a preliminary injunction blocking enforcement of the requirement. The order states that covered companies nationwide do not need to comply with the Jan. 1 reporting deadline, UNLESS the judge or a higher court reverses the order in the meantime.

The lawsuit, brought by the National Federation of Independent Business and several of its members, challenged the constitutionality of the Corporate Transparency Act, the 2021 bill that established a beneficial ownership information, or BOI, registry and the requirement for businesses to report. The plaintiffs argued that the CTA exceeded Congress’ authority to regulate interstate commerce, that it violates the First Amendment by compelling speech and infringing freedom of association, and that it violates the Fourth Amendment by forcing the disclosure of private information.

By mid-November, as the initial Jan. 1 reporting deadline approached, only about a quarter of the estimated 32.5 million covered businesses had registered. According to newly released poll data from Wolters Kluwer, 37% of firms were waiting until closer to the deadline and 12% said they had insufficient resources to do the filing. Meanwhile, 9% of businesses believed they were not covered by the rule, and 32% were unsure whether the rule applied to them.

What does this mean for you and your organization?

If you have any business entities that may have a BOI filing requirement under these rules, the preliminary injunction means you are currently not required to comply with the reported deadline of Jan. 1, 2025. If you have already filed your report, no further action should be required. If you have not yet filed, you can consider whether to go ahead and file anyway or choose not to file. 

Keep in mind, because this is a preliminary injunction, there is the risk of a higher court overruling the decision in the coming weeks, which could leave businesses with a short window of time to become compliant.

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The Corporate Transparency Act (CTA), which went into effect Jan. 1, 2024, may require small businesses to report information about ownership to the government. This law aims to combat illicit activity including tax fraud, money laundering, and financing for terrorism by capturing more ownership information for specific U.S. businesses operating in or accessing the country’s market. Under the new legislation, businesses that meet certain criteria must submit a Beneficial Ownership Information (BOI) Report to the U.S. Department of Treasury’s Financial Crimes Enforcement Network (FinCEN), providing details identifying individuals who are associated with the reporting company.

The CTA will impact millions of small businesses across the U.S. Knowing the intricacies of this act and its potential impact is essential for small businesses. Otherwise, they may incur criminal or civil penalties for not filing or updating this report.

Although public accounting firms are listed as a BOI exemption, the exemption only applies to public accounting firms registered in accordance with Section 102 of the Sarbanes-Oxley Act of 2002. Other accounting firms that do not meet the large operating company exemption will likely need to complete the filing, in accordance with FinCEN's Small Entity Compliance Guide.

UPDATE: Court Finds CTA & BOI Unconstitutional

On March 1, 2024, a federal district court ruled in the case of National Small Business United v. Yellen. The case was filed by National Small Business United, which is affiliated with the National Small Business Association. The court ruled the Corporate Transparency Act (which includes the beneficial ownership information, or BOI, reporting requirement) unconstitutional.

The U.S. Department of Treasury is likely to appeal the ruling; therefore, the case is expected to continue through the judicial process for an indeterminate amount of time. During that time, small businesses should continue to file BOI reports. Read more.

FincenFetch

Nebraska CPA Journal

U.S. Chamber Resources

AICPA Member Resources

FinCEN Resources

Risk Management/Professional Liability Considerations for CPA Firms

Additional Information

Oppose Sales Tax on Accounting Services

While we respect Governor Pillen's efforts to reduce property taxes, the Nebraska Society of CPAs is opposed to the elimination of the sales tax exemption for accounting and professional services.

How to Contact Your State Senator:

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Licensing, Mobility & Substantial Equivalency

Many states are currently discussing CPA licensure, with a focus on creating additional pathways to become a CPA and allowing automatic mobility for recognizing CPA credentials across state lines. Learn more through the resources below.

Feedback Requested on Pathway Exposure Draft

AICPA Resources

NASBA Resources

Nebraska CPA Journal

Other Resources

Employee Retention Credit (ERC)

UPDATE:

  • What to know about the Employee Retention Credit, Eide Bailly, 9/25/2024
    -  The Employee Retention Credit is a refundable tax credit still available to organizations who were adversely affected by the pandemic.
    -  While the deadline to file an ERC claim for 2020 has passed, you still have until April 15, 2025, to file a claim for any eligible 2021 quarter.
    -  The ERC voluntary disclosure program closed March 22, 2024; however, the IRS has created a process for employers to withdraw an erroneous claim that was made unintentionally.
  • Businesses with dubious ERC claims have another chance with the IRS, Journal of Accountancy, 8/15/2024

The proposed Tax Relief for American Families and Workers Act of 2024 includes disallowing employee retention credit (ERC) claims filed after Jan. 31, 2024. The ERC provision will offset other items in the bill including restoring Sec. 174 (R&E) expensing, enhancements to the child tax credit, and other tax relief provisions. It will also allow the IRS to take meaningful action against the pervasive fraud that has plagued the ERC program. While there is a chance this tax package will not pass and be signed into law, members may want to consider filing any outstanding claims immediately since there is enough congressional concern about the ERC program that lawmakers could pass a standalone bill to end the program before the statute of limitations (April 15, 2024, for 2020 quarters and Apri 15, 2025, for 2021 quarters) occurs. The moratorium on the processing of ERC claims filed after Sept. 14, 2023, has not been lifted, according to information from the AICPA and their discussions with the IRS. The IRS continues to process claims filed prior to that time.

Nebraska Pass-Through Entity Tax (PTET)

Nebraska Department of Revenue Resources

NESCPA PTET Working Group Resources

Nebraska CPA Journal

Additional Articles & Information

Stop the EPIC Tax

Lincoln Journal Star:  Nebraska's "EPIC Option" tax petition fails to qualify for November ballot, organizers say, July 3, 2024

What You Need to Know:  No New Taxes Nebraska Coalition

No New Taxes Nebraska Flier

The Simple Truth About the EPIC Option Consumption Tax

Lincoln Chamber Flier: Nebraska Tax Facts

Nebraska CPA Journal, Issue 5, 2023 - State Tax Briefing:  The Coming EPIC Disaster, What's in Store If the EPIC Option Becomes the Law

Tax Foundation Study:  The Shortcomings of Nebraska's EPIC Option

  • A potential Nebraska ballot initiative, known as the EPIC Option, would eliminate all income, property, and inheritance taxes and replace them with a statewide consumption tax of 7.5 percent.
  • The proposed rate is based on flawed calculations that do not reflect the tax base defined in the underlying proposal.
  • Tax Foundation calculations suggest that the EPIC plan would require a statewide consumption tax rate of 21.6 percent or more.
  • The EPIC Option does not prevent local governments from enacting consumption taxes, meaning the total rate could be much higher than advertised.
  • EPIC would likely result in substantial cross-border shopping, allowing Nebraskans close to a border with a lower sales tax state to avail themselves of the lower rates while leaving taxpayers in the interior of the state to bear the brunt of the newly established consumption tax.
  • The anticipated economic benefits of the proposed tax overhaul are unlikely to materialize under such a high consumption tax rate.
  • Policymakers seeking to constrain property taxes have better-targeted ways to achieve these aims.