Small businesses could face penalties of up to $10,000 from the Treasury Department if they fail to submit a new report.

• According to federal estimates, approximately 32.6 million businesses are affected by the new BOI reporting requirements.
• Those who intentionally disregard the requirement may face penalties of up to $10,000 and imprisonment.
• A Texas court temporarily halted enforcement, for now.

Many small businesses and their owners could face penalties of $10,000 or more if they don't comply with a new U.S. Treasury Department reporting requirement by year's end, according to evidence suggesting non-compliance.

The Corporate Transparency Act, enacted in 2021, mandated the disclosure of beneficial ownership information by many businesses operating in the U.S. to the Treasury's Financial Crimes Enforcement Network, commonly known as FinCEN, with the objective of combating illegal finance.

The initial BOI report submission deadline for many businesses is January 1, 2025.

According to federal estimates, approximately 32.6 million businesses, including corporations and limited liability companies, are affected.

The Treasury Department declined to provide CNBC with the number of BOI reports filed up to that point.

FinCEN states that the data makes it more difficult for bad actors to conceal or profit from their illegal earnings through complex ownership structures.

Failing to file with FinCEN can result in civil penalties of up to $591 per day, as well as criminal fines of up to $10,000 and imprisonment for up to two years.

Suddenly, a fine could sink a small business, as Charlie Fitzgerald III, a certified financial planner in Orlando, Florida, and a founding member of Moisand Fitzgerald Tamayo, stated.

According to statistics provided by FinCEN to Rep. French Hill's office, as of Dec. 1, the federal government had received approximately 9.5 million filings. Hill, a Republican from Arkansas, has advocated for the repeal of the Corporate Transparency Act and shared this data with CNBC.

That figure is about 30% of the estimated total.

As of early December, Hill's office stated that FinCEN was receiving approximately 1 million new reports per week.

Many businesses may not be aware

A "beneficial owner" is someone who owns at least 25% of a company's ownership interests or has "substantial control" over the entity.

In addition to other data, businesses must report information about their beneficial owners, including their name, birth date, address, and ID details such as a driver's license or passport.

Companies that existed before 2024 must submit their reports by January 1, 2025. Companies formed in 2024 have 90 days from their effective date of formation or registration to file, while those established in 2025 or later have 30 days.

Those with more than $5 million in gross sales and more than 20 full-time employees may not need to file a report.

Similar data is already provided by many exempt businesses, including large companies, banks, credit unions, tax-exempt entities, and public utilities.

The Treasury Department's Under Secretary for Terrorism and Financial Intelligence, Brian Nelson, stated in an interview at the Hudson Institute that the agency is actively promoting the BOI registry, which began on January 1, 2024.

Despite outreach efforts, many business owners are not complying with or aware of the requirement.

In early October, the S-Corporation Association of America stated that the national compliance landscape is "dismal."

According to the report, the majority of businesses had not yet filed a report, which means that millions of small business owners and their employees will become de facto felons on January 1, 2025.

Enforcement is up in the air

However, the situation isn't quite that grim, others said.

The federal court in Texas temporarily halted the Treasury Department's enforcement of the BOI reporting rules, allowing the agency to avoid imposing penalties while the court conducts a comprehensive review of the rule's constitutionality.

"Erica Hanichak, government affairs director at the Financial Accountability and Corporate Transparency Coalition, stated that businesses should continue to file their information, as the deadline hasn't changed, but the enforcement of the law has."

If the injunction is reversed, the government may resume enforcement, according to attorneys at Fredrikson.

The Treasury stated that it would only enforce penalties on individuals or businesses who intentionally fail to report BOI information.

The agency isn't out for "gotcha enforcement," Hanichak said.

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