On Jan. 17, 2023, the U.S. Treasury Department issued guidance on the type of data input to be required in complying with FinCEN rules effective Jan. 1, 2024, to report Beneficial Ownership Information (BOI) on U.S. entities and foreign entities registered to do business in the United States. This new reporting requirement was part of the Corporate Transparency Act (CTA) passed in October 2019. Like the FinCEN requirement in filing the FBAR, the report is not filed with a paper form, but is to be filed online through a portal.  

While the information to be reported is not a surprise with the finalizing of the regulation in September 2022, one response to many of the lines is a box you check that states the following: "Unknown (check the box if you are not able to obtain this information about the Company Applicant)." Critics have already noted allowing this response may defeat the entire purpose of this reporting as it gives applicants an opportunity to avoid the required reporting.

Final Regulations Issued

These were issued in September 2022, and a summary of the rules is as follows:

1. Reporting of Beneficial Ownership Information and Applicant of Company.

1. 1. Beneficial Ownership:
      1. Control of 25% or more.
      2. Exercise substantial control over the entity.
      3. [Note: the third definition was deleted from the final version of the bill] Receives substantial economic benefits from the assets.
   2. Includes filing for applicant-individual filing to set up or register the entity and individual who is primarily responsible for directing or controlling the filing of the document.
      1. Not required from existing entities.
      2. No update of Applicant information for new entities (after initial reporting.
   3. Entities are corporations, LLCs, partnerships, trusts or similar entities; can include foreign corporations if registered to do business in the United States.
   4. Foreign corporations are included if they have filed any type of documents with a state – this could include entities that are no longer doing business in the United States or have no U.S. physical presence (and therefore may not be required to file U.S. income tax returns).

2. Regulations effective Jan. 1, 2024.

1. 1. The due date is one year after the effective date for existing entities.
   2. New entities – 30 days after receiving notification of creation or registration.
   3. The same 30-day period for reporting of changes to beneficial ownership.

3. Exemption for a number of entities.

1. 1. Large entities (20+ people, $5 million+ of revenue and physical presence in the United States). [Probably because this type of information is already reported on a Form 1120.]
   2. Heavily regulated entities.

4. Penalties.

1. 1. Civil penalties of $500 per day.
   2. Criminal penalties of up to $10,000 and potentially prison.

5. Regulations still to be proposed related to access to BOI information obtained under these provisions.

If you have questions about your entity’s requirements to report, contact a Moore Doeren Mayhew advisor today.

Contact:

Jim Miesowicz