 By Attorney Kelly Jesson
As you know, we’ve been back and forth numerous times on whether or not business owners in the United States have to file a Beneficial Owner Information Report (BOIR) with FinCen as part of the Corporate Transparency Act (CTA). The Treasury Department finally killed it on Sunday. On March 2, 2025, the U.S. Department of the Treasury announced that it will be issuing a new rule making the BOIR reporting requirements apply to foreign companies only. The Treasury Department also announced that it will not enforce any penalties or fines for failing to file the BOIR pending the implementation of the new rule. We’re pretty confident this signals the death of the BOIR rule. If you have any questions about this, please contact Jesson & Rains for more information.
0 Comments
 By Attorney Kelly Jesson
As you all know by now, the Fifth Circuit Court of Appeals enjoined the Corporate Transparency Act (“CTA”) pending oral arguments, scheduled for March 25, 2025. What you may not have known is that there were two federal cases in Texas and one of them went up to the Supreme Court. The Supreme Court overruled the injunction in January, but because there was a nationwide injunction in place for the second case, we still didn’t have to comply with the CTA. On February 17, in light of the Supreme Court’s order, the judge in the second Texas case cancelled the injunction. FinCen has set a deadline of March 21, 2025, for all reporting companies to file their BOIR reports. Oral arguments are scheduled for March 25, after the reporting deadline. Congress has passed a bill extending the compliance deadline to January 1, 2026, and there’s also been legislation introduced to repeal the CTA. FinCen itself has stated that it’s going to change its policies to relieve some burden on small businesses. However, it’s unlikely that any of these will occur prior to March 21, 2025, so we will be working with our clients to get the BOIR reports filed. If you need assistance from us, please let us know.  By Attorney Kelly Jesson
We are writing to clarify the status of the Corporate Transparency Act since there was a lot of activity over the holidays! On December 23, 2024, the Fifth Circuit Court of Appeals granted FinCEN’s emergency motion for a stay of the Texas federal court’s order enjoining the Corporate Transparency Act. Immediately, FinCEN came out with a press release outlining the due dates for Beneficial Owner Report filings. Social media and inboxes were filled with warnings and panic. However, after an emergency rehearing en banc on December 26 (these lawyers and judges took no holiday leave apparently!), the Fifth Circuit again entered an order allowing for the injunction to continue while the case is litigated. What does this mean for you? Until there is an official ruling on the constitutionality of the Corporate Transparency Act, no Beneficial Owner Reports are required to be filed.  By Attorney Kelly Jesson
If you don’t know what The Corporate Transparency Act is, you can read about it here and here. We had been hopeful all year that it would be invalidated, and we had intentionally waited until the end of the year to file the Beneficial Owner Information Reports (“BOIR”) on behalf of our clients. In the past few weeks, we have been working on getting the BOIRs done since the deadline is less than a month away and we were beginning to lose hope. Alas, our prayers were answered yesterday! A federal judge in Texas has issued a preliminary injunction blocking enforcement of the requirement to report the beneficial owners of businesses because the law is “likely unconstitutional.” The order states that companies nationwide do not need to comply with the Jan. 1 reporting deadline unless and until a higher court reverses the order. What does this mean for you? For now, there’s no need to report. But we do need to continue to watch this situation, as the law will surely be litigated in the future. We probably have not heard the last of the Corporate Transparency Act.  By Attorney Kelly Jesson
We previously reported back in April that the Federal Trade Commission (“FTC”) banned non-compete agreements effective September 4. Almost immediately, the rule was challenged in many courts. Earlier this week, a federal judge in Dallas struck down the ban across the entire nation, holding that it was “unreasonably overbroad” and the FTC lacked the authority to enact the rule. Therefore, local business owners can continue to utilize non-compete agreements to protect their proprietary information when an employee with insider knowledge leaves to work elsewhere. However, our courts will not enforce a non-compete agreement that is not narrowly tailored in scope and geographical area to accomplish that goal, so business owners should seek the assistance of an attorney when putting these in place. If you have any questions, or need assistance with an employment agreement, please give Jesson & Rains a call!  By Attorney Kelly Jesson
The Supreme Court has issued many newsworthy rulings recently, but one you might not be familiar with is the Connelly Case. In Connelly v. United States, the Supreme Court held that the value of life insurance proceeds paid out to a business after the death of one of its owners must be included in the date of death valuation of the business. For the past twenty years, life insurance paid to a business as the result of an owner’s death has not been included in the business valuation if the business had an obligation to purchase the deceased owner’s interest in the business back. The reasoning was that this was a liability that the business owed. If a business was paid $3 million dollars in life insurance but it was obligated to pay the deceased owner’s family $3 million dollars, then it’s a wash. The implications of this ruling are significant. A business that is the beneficiary of life insurance proceeds may be valued much higher than it “really” is. For example, let’s say there are two owners of Widget Corp. The business is worth $5 million, so the owners each had $2.5 million dollars in insurance taken out by the corporation. At the death of one of the owners, the corporation was to redeem the deceased owner’s shares, which were worth $2.5 million prior to death. After the Supreme Court ruling, the business is actually worth $7.5 million ($5 million + life insurance). If the agreement was to pay half the value, the corporation would owe the family $3.75 million but only have $2.5 million in cash to do so. For people who may have to pay estate taxes (oftentimes business owners!), the difference in a few million dollar valuation can result in huge tax payments. And to add insult to injury, the family could end up paying taxes on assets they didn’t really get. In the above example, the true value of the business interests was $2.5 million but they would have to pay tax on the $3.75 million valuation if it was a taxable estate. The ruling requires business owners to carefully review their buy-sell and operating agreements to see how valuations will be determined. Is it the date of death value, or the value put on the business at the beginning of the year, or the value of the life insurance? While you can’t exclude life insurance for IRS purposes, you may be able to for buy-out valuation purposes. One way around this ruling is to use cross-purchase agreements. Instead of the business owning the life insurance policy, the individual owners will own life insurance policies on each other. When one owner dies, the life insurance is paid out to the other owners, not the business. Also, more people may utilize LLCs to own life insurance policies. The problem with cross-purchase agreements is that if you have a lot of owners, you have a lot of policies. If there are three owners, for example, there are six policies. If you set up an LLC to own the insurance policies (and then the LLC uses the money to buy the deceased owner’s interest), there are fewer policies. In this example, there would be three instead of six. If you would like additional information, or if you need a review of your business’s insurance and operating agreements, please don’t hesitate to contact the attorneys at Jesson & Rains. |
Subscribe to our newsletter.AuthorKelly Rains Jesson Categories
All
Archives
May 2025
|
RSS Feed
|
SERVICES |
SUPPORT |
©Jesson & Rains, PLLC ALL RIGHTS RESERVED.