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Beneficial Ownership Information (BOI) Report

Resources to Help You Navigate New FinCEN Requirements

Starting on January 1, 2024, millions of entities will be subject to new reporting requirements. The Beneficial Ownership Information (BOI) Report is a non-tax form that entities must file with the Department of Treasury’s Financial Crimes Enforcement Network, or FinCEN.

FinCEN enacted this new rule to combat money laundering and enhance national security by making it harder for criminals to hide behind anonymous shell companies. Unfortunately for many small business owners, that means increased reporting.

More than 6.6 million filings are expected in the first year.

This page contains helpful guidance and resources to help PBMares clients navigate this new requirement.

Does the New Beneficial Ownership Reporting Requirement Apply To You?

We created this flowchart to help you quickly review common exemptions to Beneficial Ownership Reporting. Please consult with your tax advisor before making a final determination.

Frequently Asked Questions – General

Background

The Financial Crimes Enforcement Network (FinCEN) is a bureau within the U.S. Treasury Department. FinCEN helps to protect the country’s financial system from money laundering and terrorism financing. FinCEN is authorized to collect, analyze, and distribute financial data to government and financial industry partners. FinCEN is the governmental agency that will oversee the Beneficial Ownership Report data.

The Corporate Transparency Act (CTA) is an anti-money laundering law. It is a wide-reaching piece of legislation with steep fines and penalties for non-compliance. The CTA’s purpose is to combat money laundering through the use of shell companies. To do this, the CTA mandates Beneficial Ownership Reports wherein millions of companies are required to report identifying information about owners who have at least a 25 percent stake in the business.

The Beneficial Ownership Information (BOI) Report is a non-tax document listing identifying information
about the filing entity. It is filed online with FinCEN. Taxpayers must provide the company’s:

• Full legal name and any trade or “doing business as” names
• Current and complete street address where the main place of business or headquarters is
located
• Jurisdiction where the business was created
• Taxpayer identification number (TIN)

Additionally, each beneficial owner must also report their full name, date of birth, current residential
street address, identifying number from a driver’s license, passport, or state ID, and an image to prove
identity

Federal, State, local, and Tribal officials, as well as certain foreign officials who submit a request through a U.S. Federal government agency will be allowed to access certain beneficial ownership information. Financial institutions may also be granted access with the reporting company’s permission.

Additional guidance on how officials and financial institutions can access the information is forthcoming.

According to FinCEN, the Corporate Transparency Act and BOI reporting requirement are “designed to protect U.S. national security and strengthen the integrity and transparency of the U.S. financial system.”

Definitions

Someone who owns or controls at least 25 percent of ownership interests in or exercises substantial
control over a reporting company.

Substantial control is present when any of the following four conditions apply:

• Senior officer role
• Authority to appoint or remove other officers or directors
• Important decision-maker in company finances, business, and/or structure
• Any other form of substantial control not otherwise indicated in traditional corporate structures

There are certain exemptions to substantial control wherein the reporting company would not have to
include an individual as a beneficial owner. Refer to Chapter 2.4 of the FinCEN Small Entity Compliance
Guide for more information.

A domestic reporting company can be a corporation, LLC, LLP, LP, or another entity that was formed in the U.S. by filing a document with a Secretary of State or similar office (like articles of incorporation).

Large operating companies are U.S.-based companies with more than $5 million in gross receipts or sales in the previous tax year and more than 20 full-time U.S. employees.

Foreign reporting companies are entities (including corporations and LLCs) formed under the law of a foreign country that have registered to do business in the U.S. by the filing of a document with a secretary of state or similar office.

Some businesses are considered to be inactive and thus exempt from BOI reporting requirements. To qualify under this exemption, the business must have been formed before January 1, 2020 and:

• Owned (directly or indirectly, partially or wholly) by a U.S. person
• Maintained current ownership in the previous 12 months
• Sent or received funds of $1,000 or less in the previous 12 months
• Holds no assets or ownership interests in any corporation, LLC, or similar entity, either in the U.S. or abroad

Some businesses aren’t subject to BOI reporting, provided they meet certain exemptions. There are 23 total exemptions; common ones include large operating companies, most trusts and some not-for-profit organizations, banks and other financial institutions, and inactive companies. Generally, businesses that are already heavily regulated, like financial institutions, publicly traded corporations, insurance and accounting firms, and utilities are excluded from BOI reporting.

Timing and Next Steps

For entities created before January 1, 2024: the BOI report must be filed no later than January 1, 2025.

For entities created after January 1, 2024: the BOI report must be filed within 90 days of receiving actual or public notice of the entity creation date. (The new deadline is 90 days after formation, an increase from the previous 30-day requirement.)

For basic entities, filing the BOI report probably won’t take much time. FinCEN estimates that 59 percent of affected entities have a simple structure with one beneficial owner and applicant. But for the most complex entities, preparing the filing could take around 11 hours.

FinCEN will publish a website before the end of the 2023 calendar year.

Updates to the BOI report must be filed within 30 days of receiving actual or public notice.

Failure to file the BOI report will result in significant fines and penalties: civil fines of up to $500 per day per violation and criminal penalties of up to $10,000 and/or up to two years in prison.

The first step is to determine if the entity will be subject to BOI reporting. If it is, then reporting companies should identify beneficial owners and begin gathering required information. Every reporting company will include at least one beneficial owner. Larger, more complex entities will need to allow more time for this process than single-owner LLCs.

Reporting for existing entities opens on January 1, 2024 and they will have one year to file their report. Though it has already been stated, it bears repeating that new entities formed after January 1, 2024 will only have 30 days to file their initial BOI report. Fines and penalties for non-compliance are high and escalate quickly.

It’s imperative for all existing reporting companies to begin preparing now.

Beneficial Ownership Reporting By Industry

Construction and Real Estate are two industries that are expected to be heavily impacted by the Corporate Transparency Act and BOI reporting because of how the entities are usually formed.

Construction contractors with less than $5 million in revenue should begin evaluating whether BOI reporting will apply to them.

Overall, as BOI reporting happens, fraudulent contractors should pose less of a threat. Within the construction industry, shell companies have been used to commit workers’ compensation fraud and evade payroll taxes. Fraudulent construction firms can use anonymous shell companies to sell workers’ comp policies to contractors that don’t actually cover the employees, or they’ll pay workers under the table to avoid payroll taxes.

The Beneficial Ownership Report will help the construction industry combat fraudulent contractors and schemes like this.

Real Estate entities, as they can become incredibly complex, may require more time-intensive and careful preparations to submit the BOI report. Commercial real estate companies will need to look at each entity under the main ownership structure and determine, one by one, any BOI exemptions and beneficial ownership requirements. For more information, contact Jennifer French, Construction & Real Estate Team Leader.

Banks and credit unions on their own are exempt from BOI reporting.

They will find great value in the additional reporting resulting from the Corporate Transparency Act. They can use this information to support due diligence in lending, customer relationships, and more. Financial institutions can request BOI information from FinCEN (with consent from the reporting company).

As BOI reporting users, financial institutions can take this time to establish internal subject matter expertise and update customer-facing agreements. Privacy policies and disclosures may need to be updated. The new 2024 reporting rules are different from existing beneficial ownership requirements, so banks and credit unions will also need to align their internal systems accordingly. For more information, contact JJ Edmunds, Team Leader for Financial Institutions.

Not-for-profit organizations that are described in Section 501(c) of the Internal Revenue Code and exempt from tax under Section 501(a) are not subject to BOI reporting. These include:

  • Charitable organizations, like schools, food banks, medical research, animal welfare, and human rights organizations
  • Churches and other religious organizations
  • Private foundations
  • Tax-exempt political organizations described in Section 527(e)(1)
  • Charitable or split-interest trust
  • Entities that operate exclusively to provide financial assistance to or hold governance rights over eligible tax-exempt organizations

However, there are other types of 501(c) entities. Common examples of entities that could be subject to BOI reporting are:

  • Corporations that hold a title of property for an exempt organization
  • Private clubs and recreational organizations
  • Social welfare organizations
  • Chambers of commerce
  • Labor associations or unions

If an organization loses its 501(c) or tax-exempt status, it would have 180 days to file a BOI report. For more information, contact Bo Garner, our Not-for-Profit Team Leader.

Outside Resources

If you want to learn more about Beneficial Ownership Reporting, these pages contain more details and information.

FinCEN: FAQs

FinCEN: Beneficial Ownership Reporting

FinCEN Small Entity Compliance Guide

Background of the Corporate Transparency Act

23 Exemptions: In Detail

AICPA Statement to Congress

Does the New Beneficial Ownership Reporting Requirement Apply To You?

This flowchart quickly reviews common exemptions to Beneficial Ownership Reporting. Please consult with your tax advisor before making a final determination.

Download This Flowchart
BOI flowchart image

For more information about BOI reporting under FinCEN and the Corporate Transparency Act, contact:

Ed Yoder CPA PBMares Partner

Edward T. Yoder, CPA, MSA
Partner

Charles Dean Smith CPA PBMares Partner

Charles Dean Smith, Jr., CPA
Partner

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