FinCEN Publishes “Small Entity Compliance Guide,” Proposed Filing Extension, For Small Business Beneficial Ownership Information Reporting
The new reporting regime for Beneficial Ownership Information (BOI) pursuant to the Corporate Transparency Act (CTA) draws ever closer, with reporting obligations beginning on January 1, 2024. During the second half of September, the Financial Crimes Enforcement Network (FinCEN) issued two new publications, both of which are described below, that will be helpful to Reporting Companies.
This Tax Notebook Blog has covered the new BOI reporting requirements in three previous blog posts.[i] Following is a very brief summary of the BOI reporting requirements before describing the two new FinCEN publications. For a more detailed treatment, refer to the earlier blog posts.
- Entities required to report (Reporting Companies) include any corporation, limited liability company (LLC), or other entity created by filing a formation document under the laws of a State or Indian tribe.
- There are 23 types of entities which are exempt from the reporting requirement—mostly larger companies and companies that already report to other governing bodies.
- A Reporting Company must submit certain information with respect to: (1) the Reporting Company itself; (2) each beneficial owner; and (3) the company applicant (e., the individual who filed the Reporting Company’s formation document). Regarding this information:
- The Reporting Company must report its full name, any alternative names, business address, jurisdiction of formation or registration, and Taxpayer Identification Number (TIN).
- For each beneficial owner, and each company applicant, Reporting Companies must report the individual’s full legal name, date of birth, current residential or business street address, and a unique identifying number from an acceptable identification document (g., a valid passport or driver’s license), with a scanned copy of the identification document.
- “Beneficial owner” is defined as any individual who, directly or indirectly, either: (1) exercises substantial control over a Reporting Company, or (2) owns or controls at least 25% of the ownership interests of a Reporting Company. Individuals who exercise “substantial control” include senior officers, those who can appoint or remove senior officers, those that exert control over important decisions affecting the company, and, as a final catch-all, those exerting “any other form of substantial control” over the company.
FinCEN recently published the following two items which should be useful to Reporting Companies:
Small Entity Compliance Guide
On September 18, 2023, FinCEN published its “Small Entity Compliance Guide” to assist Reporting Companies in meeting their BOI reporting obligations. The 56-page guide is very user-friendly, and is intended to provide “plain language” guidance on what small businesses may be required to report, as well as under what circumstances exemptions apply. It identifies and answers, in color-coded chapters, the following six key questions a small business might ask related to beneficial ownership information reporting:
- Does my company have to report its beneficial owners?
- Who is a beneficial owner of my company?
- Does my company have to report its company applicants?
- What specific information does my company need to report?
- When and how should my company file its initial report?
- What if there are changes to or inaccuracies in reported information?
Each question is answered using flow charts and models to demonstrate how to apply the responses to a particular business entity. Each of the 23 exemptions from the reporting requirements is broken down into “yes” or “no” questions so as to ascertain whether any of the 23 listed exemptions apply. With regard to the details of how the BOI reports will actually be completed and filed, the Guide only says “FinCEN’s filing system is currently under development and will not be available until January 1, 2024. . . . FinCEN will publish instructions and other technical guidance on how to complete the BOI report form.”
The “Small Entity Compliance Guide” can be found here:
Proposed Extension of Reporting Date
On September 27, 2023, FinCEN proposed an amendment to its final regulations that would extend the reporting deadline for Reporting Companies formed between January 1, 2024 and January 1, 2025. Currently, all Reporting Companies formed after January 1, 2024 are required to comply with their reporting requirement within 30 days of formation, with companies formed before January 1, 2024 required to report by January 1, 2025. Under the new proposed amendment, Reporting Companies formed during 2024 will have 90 days to file their initial reports.
The purpose of the proposed amendment is to allow Reporting Companies extra time to better understand and comply with the new regulatory obligations. The proposed amendment does not alter any other reporting requirements under the CTA. For example, Reporting Companies formed prior to January 1, 2024 will still have until January 1, 2025 to file their initial BOI reports, and Reporting Companies formed after January 1, 2025 will still have 30 days to file their initial BOI reports.
It is anticipated that the public comment period for this proposed rule will close October 28, 2023, and that the amendment would become final sometime in November or December 2023 in advance of the January 1, 2024 effective date.
The Notice of Proposed Rulemaking can be found here:
[i] “The Coming FinCEN Reporting Requirements” (April 19, 2022) found here The Coming FinCEN Reporting Requirements – Boutin Jones Inc.; “FinCEN Reporting Requirements Have Arrived” (February 28, 2023) found here FinCEN Reporting Requirements Have Arrived – Boutin Jones Inc.; and “FinCEN Beneficial Ownership Reporting: For Real Estate Investors the FinCEN Identifier May be Key” (June 13, 2023) found here: FinCEN Beneficial Ownership Reporting: For Real Estate Investors, the FinCEN Identifier May be Key – Boutin Jones Inc..
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