WHAT IS THIS NEW FINCEN BOI REPORTING ALL ABOUT?
The United States Government, Department of Treasury Financial Crimes Enforcement Network (FinCEN) is attempting to determine who owns which small business entities throughout the entire country. This effort is required by the Corporate Transparency Act (CTA) which was promulgated as part the larger National Defense Authorization Act of 2020 (NDAA). Congress passed the NDAA and overrode then-President Trump's veto of the act in January of 2021 with an effective date of January 1, 2024.
The Corporate Transparency Act requires business entities (each defined as a “reporting company”) to file, in the absence of an exemption, information on their “beneficial owners” with the Financial Crimes Enforcement Network (“FinCEN”) of the U.S. Department of Treasury (“Treasury”). The information is not supposed to be publicly available, but FinCEN is authorized to disclose filed information to U.S. federal law enforcement agencies, prosecutors, judges and other enforcement agencies and to financial institutions and their regulators.
*PLEASE NOTE: This legislation is new, the process is new, and there is substantial uncertainty as to how this will play out in practice. We will attempt to update information as it develops, but do NOT substitute this general discussion for specific information and advice from your legal and tax advisor(s).
.jpg)
Is
my entity a “Reporting Company”?
Short answer: Yes, it probably is. Generally, any and all entities created by filing a document with a government office, (such as an LLC, corporation, LLP, association, and possibly an unincorporated association) is a “reporting company” and must comply with the CTA requirements. There are exemptions for large companies (20+ employees and $5M+ in gross receipts), banks, credit unions, insurance companies, certain types of tax-exempt entities, and several other exemptions that likely do not apply to you.
What is a Beneficial Ownership Information Report (BOIR)?
Each reporting company must identify for Dept of Treasury every “Beneficial Owner” including their “full legal name, date of birth, current residential address (or business address for a company applicant if in the business of forming entities), and an ‘identifying number’ and ‘image’ from documents like a U.S. Passport or driver's license along with information about the reporting company including its name, any dba, its address and its EIN.
Who is a “Beneficial Owner?”
A “beneficial owner” is not necessarily an owner of a reporting company. A “beneficial owner” is any individual who, directly or indirectly, (1) exercises substantial control over a reporting company or (2) owns or controls at least 25 percent of the ownership interests of the reporting company.
When must I file the FinCEN BOI Report?
The deadline depends upon when the reporting company was created. Companies created before January 1, 2024 have a deadline of January 1, 2025 to file a BOIR. Companies created between January 1, 2024, and January 1, 2025 have a deadline of 90 days after formation. Companies formed after January 1, 2025, have 30-days after creation to file the BOIR.
How is the FinCEN BOI Report filed?
There are two methods which can be used to file the BOIR, a .pdf filing version and an online form. Both are found at https://boiefiling.fincen.gov/fileboir.
What happens if I don't file?
Companies that fail to comply with the BOIR reporting requirements (filing a BOIR, updating a BOIR due to changes) face civil and criminal penalties, including fines and imprisonment. Individuals who willfully provide false or misleading information may also be subject to penalties. Any person violating the reporting requirements of the Corporate Transparency Act is liable for civil penalties of not more than $500 for each day that the violation continues and criminal penalties of imprisonment of up to two years and fines of up to $10,000. 31 U.S.C. § 5336(h)(3)(A).
Is this new FinCEN BOI reporting permanent?
There are likely to be challenges to the CTA including whether it is constitutionally permissible. As of the writing of this post, the law remains in effect, but one federal district court has ruled it unconstitutional and there are several other pending cases.
.....................................................................
See American Bar Association. “The Corporate Transparency Act—Preparing for the Federal Database of Beneficial Ownership Information.” https://www.americanbar.org/groups/business_law/resources/business-law-today/2021-may/the-corporate-transparency-act/
See
US Dept of Treasury, An Introduction to Beneficial Ownership
Information Reporting,
https://www.fincen.gov/sites/default/files/shared/BOI-Informational-Brochure-April-2024.pdf
