The U.S. Department of Treasury’s Financial Crimes Enforcement Network (FinCEN) issued a final rule on September 29, 2022, regarding beneficial ownership information (BOI) reporting as part of the Corporate Transparency Act (CTA). Designed to protect U.S. national security and strengthen the integrity and transparency of the U.S. financial system, this new reporting requirement applies to both domestic and foreign reporting companies. The rule will require most corporations, LLCs, and any entity created by the filing of a document with a secretary of state or any similar office under the law of a state, to report information about their beneficial owners—the persons who ultimately own or control the company—to FinCEN.
The final BOI reporting rule goes into effect beginning January 1, 2024, though companies created or registered prior to that date will have until January 1, 2025, to file initial reports. Companies created after January 1, 2024, will have 30 days after creation or registration to file initial reports. After initial reporting, a reporting company will have 30 days to report changes to the information in their previously filed BOI report.
The final BOI reporting rule provides an exemption for large operating companies, defined as having 20 or more full-time employees in the United States, more than $5 million in sales reported on a prior year’s U.S. tax return, and an operating presence at a physical office within the U.S.
Reporting companies filing a BOI report must identify themselves and each beneficial owner’s full name, date of birth, current street address, and a unique identifying number and issuing jurisdiction from an acceptable identification document such as a passport or state-issued driver’s license. For this purpose, a beneficial owner includes any individual who, directly or indirectly, either exercises substantial control over a reporting company or owns or controls at least 25% of the ownership interests of the reporting company.
Companies should begin analyzing the impact of the new reporting requirements now and, if applicable, begin gathering the required information needed for the initial reports.
Article written by:
Bart Hickey, CPA
Senior Manager, Tax & Business Advisory Services
Tyler Gabalski, CPA
Manager, Tax & Business Advisory Services