Corporate Transparency Act's Beneficial Ownership Information Reporting Factsheet

Corporate Transparency Act’s Beneficial Ownership Information Reporting

The Corporate Transparency Act (CTA) was enacted as part of the National Defense Act for Fiscal Year 2021, and the reporting requirements are scheduled to begin on January 1, 2024. The CTA provides for certain entities to report their beneficial ownership information (BOI) to the Financial Crimes Enforcement Network (FinCEN). The CTA is part of a government effort to pursue corruption, money laundering, terrorist financing, tax fraud, and to identify anonymous shell companies that assist in such illegal acts. It is important to note, the CTA is not a part of the tax code, and BOI reports will not be filed with the IRS, but with FinCEN.

Who needs to report?

  • Any foreign or domestic corporation, LLC or other entity that has filed formation or registration documents with the Secretary of State or any similar office under the law of a state or Indian tribe, unless they meet one of the 23 possible exceptions, some of which include: 
    • Large operating entities that meet all of the following:
      • Employ more than 20 people in the U.S
      • Have more than $5 million in gross receipts or sales
      • Maintain an operating presence at a physical office within the United States 
    • Certain not-for-profit entities
    • See question C.2. of the FinCEN FAQs for the entire list of exceptions https://www.fincen.gov/boi-faqs

When must companies file?

  • New (created in 2024) entities must file initial BOI reports within 30 calendar days after receiving confirmation of creation. FinCEN is scheduled to begin accepting BOI reports on January 1, 2024.
  • Entities that were created before January 1, 2024, have one year – until January 1, 2025, to file their initial reports.
  • While this is not an annual report, reporting companies have 30 days to report changes to the information contained in previously filed BOI reports and must correct inaccurate information within 30 days of when the reporting company becomes aware of the inaccuracy of information in earlier reports. This will include ownership changes. 

What is reported?

  • Each entity must report the following information:
    • Full legal name of the reporting company and any trade or DBA names
    • Business Address
    • State or Tribal jurisdiction of formation or registration
    • IRS Taxpayer Identification Number
  • Additionally, each reporting entity must report the following details on its beneficial owners and, for newly created entities, its company applicant(s): 
    • Name, date of birth and address for each beneficial owner.
  • A unique identification number (EIN, Taxpayer ID) from a driver’s license, valid US passport; foreign passport or other government identification for each beneficial owner. This includes an image of the document for each beneficial owner.

Who is a Beneficial Owner?

  • Any individual who:
    • Directly or indirectly owns or controls 25% or more of the “ownership interests” of the reporting company or,
    • Who either directly or indirectly exercises substantial control over the reporting entity.

What are the ramifications to the taxpayer of not reporting?

  • Civil penalties are up to $500 per day that a violation continues
  • Criminal fines up to $10,000 and/or up to two years imprisonment

Next Steps?

Our team is closely monitoring developments with these new reporting requirements. In the meantime, entities should review governing documents and discuss any concerns regarding the BOI reporting requirements and filing of reports with legal counsel. As this new filing requirement is not a part of your current engagement with DOZ, we recommend clients create a process to capture the BOI for applicable entities to comply with the FinCEN BOI reporting requirements similar to existing processes to create business entities, file annual reports with the secretary of state, or similar periodic business forms. Please reach out to a DOZ professional for more information. 

The full version of the FINCEN BOI Small Entity Compliance Guide can be accessed at: https://www.fincen.gov/sites/default/files/shared/BOI_Small_Compliance_Guide_FINAL_Sept_508C.pdf.