In January 2021, Congress passed the Corporate Transparency Act designed to prevent the use of U.S. shell companies for money laundering, shadow investments, tax fraud, terrorism financing and other illegal activities.
Beginning January 1, 2024, the CTA requires U.S. businesses to submit a Beneficial Ownership Information (BOI) report to the U.S. Department of Treasury’s Financial Crimes Enforcement Network (FinCEN). Businesses must detail the entity’s formation and its beneficial owners. This is a one-time report that must be updated within 30 days if there are any changes or corrections required to the report.
To help you prepare for these changes, Pinion’s tax advisory team has addressed the top questions they’ve been receiving.
What are the report deadlines?
For entities formed before January 1, 2024, the initial report is due no later than January 1, 2025.
For entities formed on or after January 1, 2024, the initial report is due within 30 calendar days of formation.
Who must report?
Reporting entities include:
Domestic reporting companies – any entity that is created by filing a document with the secretary of state or similar office. This includes corporations, LLCs, limited partnerships, LLPs, LLLPs, etc.
Foreign reporting companies – any entity formed under the law of a foreign country and registered to do business in any U.S. state.
Who is exempt from this report?
Non-reporting entities include:
- SEC-reporting companies, regulated financial services companies (banks, credit unions, etc.), insurance companies, PCAOB-registered accounting firms, tax-exempt entities,
- Inactive entities. Entities that existed before 1/1/20, but are not engaged in active business, are not owned by a foreign person, have not had a change in ownership in the last 12 months, have not sent or received funds greater than $1,000 in the last 12 months, and do not hold any assets
- Subsidiaries of certain exempt entities
- Large Operating Companies qualify as exempt if they have:
- 20 or more full-time employees in the U.S., and
- An operating presence in a physical office in the U.S. (not a residence or shared space, except spaces shared with affiliates), and
- Have filed a tax return in the previous year showing more than $5 million in U.S.-sourced gross receipts.
What information is required to report?
- Information about the reporting company – including legal name, trade name or DBA, address, jurisdiction of formation and federal ID number.
- Information about beneficial owners – including full legal name, date of birth, address, identifying number and jurisdiction, OR a FinCEN identifier.
- Information about the company applicants who made the filing to create the entity – full legal name, date of birth, address, identifying number and jurisdiction, OR a FinCEN identifier.
What updates are required within 30 days?
- Any change to any information previously reported.
- Any mistakes or inaccuracies made in a previously filed report. Entities must file a corrected report within 30 days after the date the company becomes aware or has reason to know of the inaccuracy.
What can I do to prepare?
The exemptions are very narrow, so it’s important to be aware of your entity structure and identify whether you need to report or not. If you are, begin gathering the data you’ll need to report and speak to your tax advisor if you have any questions or concerns.
Contact a Pinion tax advisor with any questions regarding this new law and it’s applicability to your operation.