Corporate Transparency Act — Beneficial Ownership Information Reporting Requirement

The American Institute of Certified Public Accountants (AICPA) is advocating for a one-year delay in BOI reporting requirements; however, this has not yet been approved.

It is anticipated that 32.6 million businesses will be required to comply with this reporting requirement. The intent of the BOI reporting requirement is to help US law enforcement combat money laundering, the financing of terrorism and other illicit activity.

BREAKING NEWS: FinCEN Provides Beneficial Ownership Information Reporting Relief to Victims of Hurricane Milton; Certain Filing Deadlines in Affected Areas Extended Six Months. This Applies to Report Deadlines Between Oct. 4, 2024, and Jan. 2, 2025.

The CTA is not a part of the tax code. Instead, it is a part of the Bank Secrecy Act, a set of federal laws that require record-keeping and report filing on certain types of financial transactions. Under the CTA, BOI reports will not be filed with the IRS, but with the Financial Crimes Enforcement Network (FinCEN), another agency of the Department of Treasury.

Below are answers to six frequently asked questions regarding this matter. The information provided is meant for general understanding, and should not be applied to your specific circumstances without consultation with competent legal counsel and/or another retained professional adviser.

1.What entities are required to comply with the CTA’s BOI reporting requirement? 

Entities organized both in the U.S. and outside the U.S. may be subject to the CTA’s reporting requirements. Domestic companies required to report include corporations, limited liability companies (LLCs) or any similar entity created by the filing of a document with a secretary of state or any similar office under the law of a state or Indian tribe.

Domestic entities that are not created by the filing of a document with a secretary of state or similar office are not required to report under the CTA.

Foreign companies required to report under the CTA include corporations, LLCs or any similar entity that is formed under the law of a foreign country and registered to do business in any state or tribal jurisdiction by filing a document with a secretary of state or any similar office.

2.Are there any exemptions from the filing requirements?

There are 23 categories of exemptions. Included in the exemptions list are publicly traded companies, banks and credit unions, securities brokers/dealers, public accounting firms, tax-exempt entities and certain inactive entities, among others. Please note these are not blanket exemptions and many of these entities are already heavily regulated by the government and thus already disclose their BOI to a government authority.

In addition, certain “large operating entities” are exempt from filing. To qualify for this exemption, the company must:

a)  Employ more than 20 people in the U.S.;

b)  Have reported gross revenue (or sales) of over $5M on the prior year’s tax return; and

c)  Be physically present in the U.S.

3.Who is a beneficial owner?

Any individual who, directly or indirectly, either:

• Exercises “substantial control” over a reporting company, or
• Owns or controls at least 25 percent of the ownership interests of a reporting company

An individual has substantial control of a reporting company if they direct, determine or exercise substantial influence over important decisions of the reporting company. This includes any senior officers of the reporting company, regardless of formal title or if they have no ownership interest in the reporting company.

The detailed CTA regulations define the terms “substantial control” and “ownership interest” further.

There are different filing timeframes depending on when an entity is registered/formed or if there is a change to the beneficial owner’s information.

• Existing entities created/registered before 1/1/24 — must file by 1/1/25
• New entities created/registered on or after 1/1/24 and before 1/1/25 — must file within 90 days
• Entities created/registered on or after 1/1/25 — must file within 30 days
• Reporting companies that have changes to previously reported information or discover inaccuracies in previously filed reports — must file within 30 days after the date of the change

FinCEN began accepting beneficial ownership information reports on January 1, 2024.

5.What sort of information is required to be reported?

Companies must report the following information: full name of the reporting company, any trade name or doing business as (DBA) name, business address, state or Tribal jurisdiction of formation, and an IRS taxpayer identification number (TIN).

Additionally, information on the beneficial owners of the entity and for newly created entities, the company applicants of the entity is required. This information includes — name, birthdate, address, and unique identifying number and issuing jurisdiction from an acceptable identification document (e.g., a driver’s license or passport) and an image of such document.

6.Risk of non-compliance?

Penalties for willfully not complying with the BOI reporting requirement can result in criminal and civil penalties of $500 per day and up to $10,000 with up to two years of jail time.

Our aim is to ensure a seamless experience for our clients, and we will proactively share any relevant information to assist you in meeting your reporting obligations. We will keep you posted as additional information becomes available. For more information about the CTA, visit FinCEN. Beneficial Ownership Information for Small Businesses can be found here.

To file a report using the BOI E-Filing system, click here.