NEW FEDERAL REPORTING REQUIREMENT
ISSUED BY THE FEDERAL FINANCIAL CRIMES ENFORCEMENT NETWORK (FINCEN)
There is an important new federal reporting requirement developed by the Federal Financial Crimes Enforcement Network (FinCEN) pursuant to the Corporate Transparency Act. This is the same reporting requirement we have mentioned in several of our monthly newsletters over the past twelve months. This new requirement affects most small entities and is especially important because of the magnitude of the penalties that FinCEN may assess for noncompliance including a $591 per day charge, without a cap, while the noncompliance continues.
12/11/24 Update
On December 3, 2024, a U.S. District Court issued a nationwide preliminary injunction against the Corporate Transparency Act (CTA) temporarily blocking enforcement of the FinCEN beneficial ownership (BOI) reporting requirements across the entire United States.
In response, FinCEN has posted the following statement on its website:
In light of a recent federal court order, reporting companies are not currently required to file beneficial ownership information with FinCEN and are not subject to liability if they fail to do so while the order remains in force. However, reporting companies may continue to voluntarily submit beneficial ownership information reports.
Which Companies Are Affected?
An entity required to report to FinCEN is referred to as a Reporting Company. A Reporting Company is a domestic entity that was both created by the filing of a document with the Secretary of State or any similar office in the U.S. and that is not exempt from filing under one of 23 exemptions. Unfortunately, the exemptions are very narrow and provide relief to only a few types of entities. Foreign entities registered in the U.S. are similarly affected.
What Information is Reported?
Reporting Companies are required to report certain information (name, address, date of birth, social security number, and copy of picture ID) about their ‘Beneficial Owners”. Beneficial Owners are individuals that either directly or indirectly exercise substantial control over the Reporting Company or own directly or indirectly at least 25 percent of the Reporting Company’s ownership interests.
When are these Reports Due?
The reports filed by Reporting Companies are referred to by FinCEN as beneficial ownership information reports (BOIR). For entities existing at December 31, 2023, initial reports must be filed by December 31, 2024. For entities created after December 31, 2023 and before January 1, 2025, initial reports are due within 90 days of creation.
How are these Reports Filed?
BOI reports must be filed electronically using FinCEN’s BOI E-Filing website. Paper filings are not allowed. There is no requirement to file BOI reports annually or on any other time interval. However, as mentioned in the following paragraph, Updated Reports and Corrected Reports must be filed in their entirety within 30 days of being triggered.
Who should perform the Filings?
FinCEN has stated it expects that many, if not most, Reporting Companies will be able to submit their beneficial ownership reports to FinCEN on their own using the guidance that FinCEN has issued. We feel it is important that someone with a day-to-day connection to the Reporting Company, such as an owner, manager or employee, perform the initial BOIR submission and become familiar with BOIR reporting as it applies to the Reporting Company. This view is primarily due to the ongoing requirements to file “Updated Reports” and “Corrected Reports”. An Updated Report, in its entirety, must be filed within 30 days of any change in the BOIR information previously filed (for example, a beneficial owner’s address changes). A Corrected Report, in its entirety, must be filed within 30 days of the date the Reporting Company becomes aware of an error or had reason to know of the error (for example, a social security number was incorrect). Accordingly, all Reporting Companies are continually responsible for monitoring changes in their BOIR information and for filing new BOI reports in their entirety whenever changes or corrections materialize.
How do I learn about how to Perform Filings?
The preceding description of BOI reporting only touches on some highlights. For more comprehensive information check-out the document below titled “Guidance for Filing Beneficial Owner Information Reports (BOIR) with the Financial Crimes Enforcement Network (FinCEN)”. This document is designed to be a core reference guide adequate for preparation and submission of many filers’ BOIR reports. For unusual or complicated issues that may be beyond the scope of the document, it also includes links to FinCEN produced resources.
Links
Core Guidance:
Supplemental Resources:
FinCEN BOIR PDF Method Step by Step Instructions
FinCEN Small Entity Compliance Guide V1.1 (BOIR Requirements)
FinCEN BOIR Report Line by Line Filing Instructions
FinCEN BOI Frequently Asked Questions
CEP FinCEN Data Collection Sheet V1.3
Letter to Supplement Delivery of FinCEN Report
