We want to alert business owners of a NEW compliance requirement coming in 2024 for most businesses, and it’s not from the IRS, but a federal agency, most business owners have never dealt with before, FinCEN.
FinCEN is the Financial Crimes Enforcement Network, a bureau of the U.S. Department of the Treasury that collects and analyzes financial data to combat money laundering, terrorist financing, and other financial crimes.
The FINCEN Beneficial Ownership Information (BOI) Reporting Requirements are a set of rules that implement the Corporate Transparency Act (CTA) of 2022, which was implemented to prevent the abuse of corporate entities by illicit actors and corrupt officials.
Below is a quick recap of the rules:
The effective date of this reporting is January 1, 2024. The rules require reporting companies pre-existing to that date to file an initial report with FinCEN by January 1, 2025. New companies formed on or after January 1, 2024 will be required to file an initial report within 30 days of creation. Reporting companies must also file updated reports within 30 days after any change in their beneficial ownership information.
The rules require certain companies in the United States to report information about their beneficial owners, i.e., the individuals who ultimately own or control the company, to FinCEN.
The rules apply to reporting companies, which are corporations, limited liability companies, or similar entities that are created by filing a document with a secretary of state or a similar office under the law of a state or Indian Tribe or formed under the law of a foreign country and registered to do business in the United States.
The rules do not apply to entities that are exempt from reporting, such as publicly traded companies, banks, credit unions, investment companies, insurance companies, charities, churches, and certain subsidiaries of exempt entities.
The rules require reporting companies to file reports with FinCEN that identify two categories of individuals: (1) the beneficial owners of the entity; and (2) the company applicants of the entity.
A beneficial owner is an individual who directly or indirectly owns or controls at least 25% of the ownership interests of the reporting company or exercises substantial control over the reporting company.
A company applicant is an individual who files an application to form or register a reporting company under state or Tribal law or registers a foreign entity to do business in the United States.
The rules require reporting companies to provide the following information about each beneficial owner and company applicant: legal name, date of birth, residential address, and a unique identifying number from an acceptable document such as a passport, driver’s license, or state ID.
The rules also require reporting companies to provide information about themselves, such as their legal name, entity type, address, and identification number.
The rules provide that FinCEN will maintain a secure and confidential database of beneficial ownership information that will be accessible only to authorized users, such as law enforcement agencies, national security agencies, financial institutions, and state and local governments.
The BOI reports will be filed electronically with FinCEN. FinCEN is currently building its filing system and expects to have it ready for initial reports by January 1, 2024.
The rules impose civil and criminal penalties for failing to report beneficial ownership information or providing false or fraudulent information.
To learn more about this new compliance requirement, we’ve included a link below directly from FinCEN’s website. Also, make sure to discuss this with your internal and/or external accounting team. BOI Small Compliance Guide (fincen.gov)