BOI Reporting Requirement: January Update

January 27, 2025 by Leave a comment

The Beneficial Ownership Interest (BOI) reporting requirement is still suspended, but we are getting closer to potentially seeing it applied.

ASA has previously warned members about the reporting obligations that were originally set to take effect in January 2025. The Corporate Transparency Act (CTA) requires small businesses to report their BOI. ASA has also published an article outlining the reporting obligations and identifying who must submit the required information.

As a brief reminder, businesses are exempt from this obligation only if they meet all three of the following criteria:

  1. They have more than 20 full-time domestic employees.
  2. Their gross domestic receipts or sales exceed $5 million.
  3. They have an operating presence at a physical office within the United States.

This exemption generally applies to larger businesses. Therefore, many smaller businesses will be required to submit the necessary BOI information.

BOI reporting has been challenged in court through two separate cases. Our updates thus far have primarily focused on one case, Texas Top Cop Shop, Inc. v. Garland. Below is a timeline of the BOI obligations based on this legal challenge:

  • December 5, 2024: A Texas federal district court ordered an injunction on BOI reporting, suspending the obligation.
  • December 23, 2024: The 5th Circuit Court of Appeals reversed the injunction, reinstating BOI reporting. The court also scheduled expedited oral arguments for March 25, 2025.
  • December 26, 2024: The 5th Circuit’s Merit Panel reversed the previous reversal, reinstating the injunction. As a result, the reporting obligation was once again suspended.

The matter was subsequently brought before the Supreme Court, which issued its decision on Friday, January 23, 2025. The Court issued a stay on the December 5 injunction, which technically reinstated the BOI reporting obligation until the conclusion of the appeal in the 5th Circuit. In his concurring opinion, Justice Gorsuch suggested that the court should examine whether it is inappropriate for a a district court to issue universal injunctive relief (e.g. he seems to feel that trial courts should not be allowed to stay enforcement of a law across the entire country).

BOI reporting requirements remain suspended due to a decision in a separate case, Smith v. United States Department of the Treasury. On January 7, 2025, the U.S. District Court for the Northern District of Texas issued a nationwide injunction in this case, prohibiting enforcement of the CTA and suspending all reporting requirements under it, including BOI reporting.

This injunction drew on some analysis from the earlier case but also provided its own reasoning. The court granted the injunction based on its determination that Smith is likely to succeed on the merits of the challenge to the CTA. The court examined the constitutionality of the CTA and concluded that the Act would likely be found to exceed Congress’s power to regulate interstate commerce or other enumerated powers.

The Supreme Court did not comment on the CTA’s constitutionality or the likelihood of success for either party. Therefore, it remains unclear whether businesses will need to comply with the reporting obligation in the near future.

As a best practice, businesses may wish to maintain accurate ownership information internally. This ensures that, should the obligation to report arise, the necessary information is readily available to ensure compliance.

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Watch Those Customer Purchase Orders – They Could Get You into Trouble!

September 13, 2023 by Leave a comment

If someone asks you to boycott Israel, did you know that you have an affirmative obligation under the U.S. regulations to report it? And did you know that this standard can also apply to the template language on a customer’s purchase order?

Recently, Pratt & Whitney Component Solutions (“PWCS”) found this out the hard way, with a BIS enforcement action that resulted in PWCS paying a settlement of $48,750. The offensive remark? Standard language on an airline purchase order! This illustrates how important it is to look carefully at each purchase order you receive.

Most Americans know that the U.S. anti-boycott rules forbid a U.S. person from participating in a foreign boycott that is inconsistent with U.S. policy. The rule most often arises in the context of boycotts against Israel.

The reporting requirement of the anti-boycott rule requires U.S. persons to report to the government when they get a request to take any “action which has the effect of furthering or supporting a restrictive trade practice or boycott fostered or imposed by a foreign country against a country friendly to the United States or against any United States person.” The Unites States has explicitly stated that failure to report such boycott-related requests in the manner prescribed may constitute a violation of the export regulations.

In the recent PWCS case, the United States claimed that Qatar Airways had stated:

“Please note that parts made in Israel is prohibited to to be imported into State of Qatar and such shipments will be held up in customs.”

This language appeared on purchase orders from Qatar Airways. This was described as a boycott request that must be reported under the anti-boycott reporting requirements. The charging document described it as a “request … to take an action which would have the effect of furthering or supporting a restrictive trade practice or unsanctioned foreign boycott.”

A United States person may comply or agree to comply with the customer’s national import requirements, but the reporting obligation still remains.

Example

Distributor X, receives an order from ZZ airlines which is located in country Z. Country Z has a boycott against Country B. The import laws of Z prohibit the import of goods produced or manufactured in Country B. Country B is protected by the U.S. anti-boycott rule. In filling this type of order, Distributor X would usually include some component parts produced in Country B.

For the purpose of filling this order, Distributor X may substitute comparable component parts in place of parts produced in Country B, because the import laws of Country Z prohibit the import of goods manufactured in Country B. For example, there may be alternatives replacement parts available that are made in a different country than the OEM parts.

However, Distributor X may not furnish negative certifications regarding the origin of components in response to import and shipping document requirements (e.g. Distributor X cannot certify that the parts did not come from Country B).

Reporting

Your duty to report arises even if you refuse the language (e.g. if you strike it out of a contract. Even when you refuse to participate, you still have a reporting duty. If you receive a communication that must be reported, then you should submit your report by mail or electronically through the BIS website.

Mailed paper reports must be submitted in duplicate to: Report Processing Staff, Office of Antiboycott Compliance, U.S. Department of Commerce, Room 6098, Washington, DC 20230. You should use Form BIS–621P (for single transactions) Form BIS–6051P (to report multiple transactions).

Electronic reports may be submitted through the Office of Antiboycott Compliance Web page.

Reports must be made by the last day of the month following the calendar quarter in which the request was received (e.g., April 30 for the quarter consisting of January, February, and March). There is a one month extension granted to US persons who are located outside the United States (e.g., May 31 for the quarter consisting of January, February, and March).

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